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A two year Government bond has a face value of $100, a yield of 2.5% pa and a fixed coupon rate of 0.5% pa, paid semi-annually. What is its price?

Question 580 price gains and returns over time, time calculation, effective rate

How many years will it take for an asset's price to quadruple (be four times as big, say from $1 to $4) if the price grows by 15% pa?

Question 605 cross currency interest rate parity, foreign exchange rate

Question 617 systematic and idiosyncratic risk, risk, CAPM

A stock's required total return will increase when its:

Question 723 mean and median returns, return distribution, arithmetic and geometric averages, continuously compounding rate

Here is a table of stock prices and returns. Which of the statements below the table is NOT correct?

Price and Return Population Statistics
Time	Prices	LGDR	GDR	NDR
0	100
1	99	-0.010050	0.990000	-0.010000
2	180.40	0.600057	1.822222	0.822222
3	112.73	0.470181	0.624889	0.375111

Arithmetic average		0.0399	1.1457	0.1457
Arithmetic standard deviation		0.4384	0.5011	0.5011

(a) The geometric average of the gross discrete returns (GAGDR) equals 1.04075 which is 104.075%.

(b) ##\exp \left( \text{GAGDR} \right) = \text{AALGDR}##. The natural exponent of the GAGDR equals the arithmetic average of the logarithms of the gross discrete returns (AALGDR).

(c) ##\text{GAGDR}^T = \left( P_T/P_0 \right)##. The GAGDR raised to the power of the number of time period that it's measured over equals the ratio of the first and last prices.

(d) ##\text{GAGDR} = \exp \left( \text{AALGDR} \right)##. This is always true, regardless of the distribution of the prices or returns. The logarithm of the geometric average of the gross discrete returns (LGAGDR) is always equal to the arithmetic average of the logarithm of the gross discrete returns (AALGDR).

(e) ##\text{AAGDR} \approx \exp \left( \text{AALGDR} + \text{SDLGDR}^2/2 \right)##. This is only approximately true and depends on the distribution of the prices and returns. It's asymptotically true as the time period that the returns are measured over reaches infinity.

Question 777 CAPM, beta

The market's expected total return is 10% pa and the risk free rate is 5% pa, both given as effective annual rates.

A stock has a beta of 0.5.

In the last 5 minutes, the federal government unexpectedly raised taxes. Over this time the share market fell by 3%. The risk free rate was unchanged.

What do you think was the stock's historical return over the last 5 minutes, given as an effective 5 minute rate?

Question 850 gross domestic product, gross domestic product per capita

Below is a table showing some countries’ GDP, population and GDP per capita.

Countries' GDP and Population
	GDP	Population	GDP per capita
	USD million	millions of people	USD
United States	18,036,648	325	55,492
China	11,158,457	1,383	8,066
Japan	4,383,076	127	34,586
Germany	3,363,600	83	40,623
Norway	500,519	5	95,027

Source: "GDP and its breakdown at current prices in US Dollars" United Nations Statistics Division. December 2016.

Using this data only, which one of these countries’ citizens have the highest living standards?

Question 873 Sharpe ratio, Treynor ratio, Jensens alpha, SML, CAPM

Which of the following statements is NOT correct? Fairly-priced assets should:

Question 892 foreign exchange reserve, foreign exchange rate, no explanation

The Chinese central bank has the largest amount of foreign currency reserves.

What could the large amounts of foreign exchange reserves held by the Chinese government be used for in a currency crisis? China's currency is called the Renminbi (RMB) or Yuan (CNY). In a Chinese currency crisis the Chinese government is likely to use its FX reserves to:

Question 918 duration, Macaulay duration, modified duration, bond convexity

A fixed coupon bond’s modified duration is 10 years, and yields are currently 5% pa compounded annually. Which of the following statements about the bond is NOT correct?