Stock A and B's returns have a correlation of 0.3. Which statement is NOT correct?
All things remaining equal, the variance of a portfolio of two positively-weighted stocks rises as:
Question 693 boot strapping zero coupon yield, forward interest rate, term structure of interest rates
Information about three risk free Government bonds is given in the table below.
| Federal Treasury Bond Data | ||||
| Maturity | Yield to maturity | Coupon rate | Face value | Price |
| (years) | (pa, compounding semi-annually) | (pa, paid semi-annually) | ($) | ($) |
| 0.5 | 3% | 4% | 100 | 100.4926 |
| 1 | 4% | 4% | 100 | 100.0000 |
| 1.5 | 5% | 4% | 100 | 98.5720 |
Based on the above government bonds' yields to maturity, which of the below statements about the spot zero rates and forward zero rates is NOT correct?
Question 779 mean and median returns, return distribution, arithmetic and geometric averages, continuously compounding rate
Fred owns some BHP shares. He has calculated BHP’s monthly returns for each month in the past 30 years using this formula:
###r_\text{t monthly}=\ln \left( \dfrac{P_t}{P_{t-1}} \right)###He then took the arithmetic average and found it to be 0.8% per month using this formula:
###\bar{r}_\text{monthly}= \dfrac{ \displaystyle\sum\limits_{t=1}^T{\left( r_\text{t monthly} \right)} }{T} =0.008=0.8\% \text{ per month}###He also found the standard deviation of these monthly returns which was 15% per month:
###\sigma_\text{monthly} = \dfrac{ \displaystyle\sum\limits_{t=1}^T{\left( \left( r_\text{t monthly} - \bar{r}_\text{monthly} \right)^2 \right)} }{T} =0.15=15\%\text{ per month}###Assume that the past historical average return is the true population average of future expected returns and the stock's returns calculated above ##(r_\text{t monthly})## are normally distributed. Which of the below statements about Fred’s BHP shares is NOT correct?
The below diagram shows a firm’s cash cycle.
Which of the following statements about companies’ cash cycle is NOT correct?
A stock has a beta of 1.2. Its next dividend is expected to be $20, paid one year from now.
Dividends are expected to be paid annually and grow by 1.5% pa forever.
Treasury bonds yield 3% pa and the market portfolio's expected return is 7% pa. All returns are effective annual rates.
What is the price of the stock now?
The present value of an annuity of 3 annual payments of $5,000 in arrears (at the end of each year) is $12,434.26 when interest rates are 10% pa compounding annually.
If the same amount of $12,434.26 is put in the bank at the same interest rate of 10% pa compounded annually and the same cash flow of $5,000 is withdrawn at the end of every year, how much money will be in the bank in 3 years, just after that third $5,000 payment is withdrawn?