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Module 1A financial mathematics (PV&FV)
1.You expect to earn $100,000 now and $130,000 in next year. If you decided to
consume $80,000 today and market interest rates were 10% p.a. compounded semi-
annually over the period, how much will you have in one year?
A. $130,000
B. $152,050
C. $150,000
D. $240,000
E. $240,250
2. Mr Rogers deposits $20,000 in a term deposit with BankEast Ltd for 10 years. If the
account is paying interest at a rate of 4% p.a. compounded quarterly, how much
interest will Mr Rogers earn in the final year?
A. $812.08
B. $977.73
C. $1,138.65
D. $1,161.90
E. $9,777.28
3. Which of the following give rise to the time value of money?
A. Negative interest rates and price discovery
B.Liquidity and positive interest rates
C.Liquidity and agency costs
D.Liquidity and inflation
E.Inflation and positive interest rates
Module 1B financial mathematics (Annuity)
1. Optus is considering a new investment opportunity. The investment will
generate $1m per year for 10 years with the first cash flow in one years'
time. The opportunity cost for this type of investment is expected to
be8%p.a.for years 1 to 5 rising to 10% p.a. for years 6 to 10. What will be
the present value of this investment?
A.$6.71 million
B.$6.57 million
C.$6.14 million
D.$6.42 million
E.$7.78 million
2. Volkswagen will invest in an asset to fund its change into electrifying cars.
It is expected to generate a quarterly cash flow forever that will grow at a
constant rate of 10% p.a. compounded quarterly. The opportunity cost of
capital is 15% p.a. compounded annually. How much would the first cash
flow be from such an asset if this asset is currently trading at $1.05 million?
A. $52,500.00
B. $11,085.98
C. $35,680.00
D. $23,876.54
E. $44,962.31
3. A housing loan for $400,000 is repayable over 15 years with monthly
instalments at 4.8% p.a. compounding monthly. Assuming the repayments
are made as scheduled, the amount of the loan outstanding after 5 years
is (choose the closest answer):
A. $211,212
B. $297,044
C. $166,225
D. $266,667
E. $233,775
Module 1C financial mathematics (Risk & return)
1. Given the following information about state of economy:
State Probability of
state
Proctor &
gamble
Expected
rate of
return
Contraction 55% 3.5%
Expansion 45% 18.2%
Calculate the risk (standard deviation of returns) for Proctor Gamble.
A.10.115%
B. Cannot be calculated with the information provided
C.9.158%
D.7.313%
E. 8.241%
2. You have a choice between investing in Asset X that yields 17% p.a. on
average and British Airways shares.
The following year end price and annual dividend data was found for
British Airways:
Which is your preferred choice and why?
A.British Airways shares as the expected return is 18.988%higher than Asset X
B.Asset X as the expected return of British Airways shares is lower at 16.248%
C.Asset X as the expected return of British Airways shares is lower at 13.480%
D.British Airways shares as the expected return is 16.157%higher than Asset X
E.Asset X as the expected return of British Airways shares is lower at 15.215%
3. Sony has an average historical return of 16.3%p.a.and a standard deviation of
5.3%. In which range do you expect the returns of Sony to fall approximately 68%of
the time?
A.5.7% to 26.9% p.a.
B.5.3% to 16.3% p.a.
C.11.0% to 21.6% p.a.
D.6.2% to 18.5% p.a.
E.12.7% to 19.9% p,a.
Module 4 Portfolio Theory
1. Which of the following statements is false? Beta is:
A.A measure of the stock's systematic risk
B.Able to be completely diversified away
C.Tells us how sensitive a stock is to market movements
D.A measure of the stock's market risk
E.Cannot be completely diversified away
2. Market risk is also called:
A.Diversifiable risk and industry risk
B.Systematic risk and diversifiable risk
C.Non-diversifiable risk and systematic risk
D.Unique risk and non-diversifiable risk
E.None of the options
3. Security betas are determined by:
A.overall cycle of the market
B.riskiness of the market
C.market risk difference
D.covariance of a security's returns with the market's returns
E.general direction of the market movement
4. The beta of the risk-free asset is:
A.2
B.0.5
C.-1
D.1
E.0
5. Which of the following is an example of systematic risk?
A.IBM posts lower than expected earnings
B.GDP forecasts are revised downwards as the economy slows
C.Apple announces record sales growth
D.Trade disputes reduce Treasury Wines export sales
E.New regulations impact companies operating in the aged care sector
6. Which of the following statements about the market portfolio is false?
A.The market portfolio lies on the capital market line
B.The market portfolio contains both systematic and unsystematic risk
C.The market portfolio lies on the security market line
D.The market portfolio includes all risky assets in the world
E.The market portfolio is on the efficient frontier
7. What type of investor would prefer portfolios lower on the capital market line
(CML)?
A.Ambiguity-neutral
B.Risk-neutral
C.Risk-loving
D.Risk-averse
E.Variance-neutral
8. The tangency point between the capital market line (CML) and the efficient
frontier of risky assets, in equilibrium, will most likely identify the:
A.Security market line
B.Capital asset pricing model (CAPM)
C.the market portfolio
D. risk-free rate
E.Sharpe ratio