Portfolio Details | ||||||
Stock | Expected return |
Standard deviation |
Correlation | Beta | Dollars invested |
|
A | 0.2 | 0.4 | 0.12 | 0.5 | 40 | |
B | 0.3 | 0.8 | 1.5 | 80 | ||
What is the beta of the above portfolio?
According to the theory of the Capital Asset Pricing Model (CAPM), total risk can be broken into two components, systematic risk and idiosyncratic risk. Which of the following events would be considered a systematic, undiversifiable event according to the theory of the CAPM?
Question 213 income and capital returns, bond pricing, premium par and discount bonds
The coupon rate of a fixed annual-coupon bond is constant (always the same).
What can you say about the income return (##r_\text{income}##) of a fixed annual coupon bond? Remember that:
###r_\text{total} = r_\text{income} + r_\text{capital}###
###r_\text{total, 0 to 1} = \frac{c_1}{p_0} + \frac{p_1-p_0}{p_0}###
Assume that there is no change in the bond's total annual yield to maturity from when it is issued to when it matures.
Select the most correct statement.
From its date of issue until maturity, the income return of a fixed annual coupon:
An investor owns an empty block of land that has local government approval to be developed into a petrol station, car wash or car park. The council will only allow a single development so the projects are mutually exclusive.
All of the development projects have the same risk and the required return of each is 10% pa. Each project has an immediate cost and once construction is finished in one year the land and development will be sold. The table below shows the estimated costs payable now, expected sale prices in one year and the internal rates of returns (IRR's).
Mutually Exclusive Projects | |||
Project | Cost now ($) |
Sale price in one year ($) |
IRR (% pa) |
Petrol station | 9,000,000 | 11,000,000 | 22.22 |
Car wash | 800,000 | 1,100,000 | 37.50 |
Car park | 70,000 | 110,000 | 57.14 |
Which project should the investor accept?
Which of the following equations is NOT equal to the total return of an asset?
Let ##p_0## be the current price, ##p_1## the expected price in one year and ##c_1## the expected income in one year.
Question 574 inflation, real and nominal returns and cash flows, NPV
What is the present value of a nominal payment of $100 in 5 years? The real discount rate is 10% pa and the inflation rate is 3% pa.
A company conducts a 10 for 3 stock split. What is the percentage increase in the stock price and the number of shares outstanding? The answers are given in the same order.
On 1 February 2016 you were told that your refinery company will need to purchase oil on 1 July 2016. You were afraid of the oil price rising between now and then so you bought some August 2016 futures contracts on 1 February 2016 to hedge against changes in the oil price. On 1 February 2016 the oil price was $40 and the August 2016 futures price was $43.
It's now 1 July 2016 and oil price is $45 and the August 2016 futures price is $46. You bought the spot oil and closed out your futures position on 1 July 2016.
What was the effective price paid for the oil, taking into account basis risk? All spot and futures oil prices quoted above and below are per barrel.
Question 841 gross domestic product, government spending
The government spends money on:
- Goods and services such as defence, police, schools, hospitals and roads; and
- Transfer payments (also called welfare) such as the pension, dole, disability support and student support.
When calculating GDP (=C+I+G+X-M), the ‘government spending’ component (G) is supposed to include:
Question 921 utility, return distribution, log-normal distribution, arithmetic and geometric averages, no explanation
Who was the first theorist to propose the idea of ‘expected utility’?