Question

1.

1-What is the present value of a constant perpetuity of 25 per year where the required rate of return is 5%?

193.61

22.73

500.00

250.00

2-Calculate the 2 year annuity factor if the required rate of return is 10%.

2.486

1.736

0.091

0.826

3-What is the present value of a cash inflow of 1250 four years from now if the required rate of return is 8% (Rounded to 2 decimal places)?

918.79

938.75

835.75

992.50

4-What is the future value of 875 six years from now if the required rate of return is 7% (Rounded to 2 decimal places)?

1550.50

1147.13

1281.00

1313.14

5-If the present value of a growing perpetuity is 214, the required rate of return is 10%, and growth rate is 3%, what is the cash flow in year 1? (Round to the nearest whole number).

3057

15

21

6

6-If a bond is trading at a premium, what is the relationship between the bond’s coupon rate, current yield and yield to maturity?

Coupon Rate < Current Yield < Yield to Maturity

Coupon Rate > Current Yield > Yield to Maturity

Coupon Rate > Yield to Maturity > Current Yield

Coupon Rate = Current Yield = Yield to Maturity

7-What is the current yield on a 3 year bond with 10% annual coupons, a par value of 100, and a current price of 107.87?

7.37%

7.00%

9.27%

10.00%

8-What is the yield to maturity for a 3 year bond with a 10% annual coupon if the bond is trading at par?

9.00%

11.00%

10.00%

9.75%

9-What is the price of a two year bond with a 9% annual coupon and a yield to maturity of 8%?

97.51

101.78

105.25

102.53

10-What is the definition of yield to maturity?

The return the investor gets from the income component of a bond as a percent of it’s current price

The overall return the investor makes if they purchase a bond today and hold to maturity

The overall return the investor makes as a percent of a bond’s par value

The return the investor gets from the income component of a bond as a percent of it’s par value

11-What is the weight of capital for ABC Limited which has the following capital structure? $5m of equity with a cost of equity of 15%; $2m of mezzanine finance with a cost of 9.5%; $1m of senior debt with a cost of debt of 7%

13.73%

8.63%

9.56%

12.63%

12-What is the expected share return given the following macro-economic probabilities? Probability of recession 20% – Share return 5%; Probability of steady state 60% – Share return 10%; Probability of boom 20% – Share return 15%

7%

12%

8%

10%

13-Calculate a four-day moving average for the price of the stock for the end of Day 7. Day 1 – 62.00; Day 2 – 56.00; Day 3 – 50.00; Day 4 – 60.00; Day 5 – 59.00; Day 6 – 55.00; Day 7 – 59.00; Day 8 – 63.00

56.25

57.00

58.25

59.00

14-Calculate a three-day weighted moving average for the price of the stock for the end of Day 7 where the most recent price has a weight of 3, the next has a weight of 2, and the oldest price has a weight of 1. Day 1 – 62.00; Day 2 – 56.00; Day 3 – 50.00; Day 4 – 60.00; Day 5 – 59.00; Day 6 – 55.00; Day 7 – 59.00; Day 8 – 63.00

57.17

57.83

56.00

57.67

15-An insurance company has provided you with a sample of paid claims. The sample includes the following claims: 192, 113, 200, 287, and 225. What are the mean and the variance respectively of this sample rounded to nearest whole number?

210, 3942

210, 63

203, 63

203, 3942

16-In the simple linear regression equation y = α + βx + ε, what is β?

The error term

The slope of the line of best fit

The independent variable

The y intercept

17-Covariance is best described as:

a measure of how much two sets of numbers change together

a measure of how far one set of numbers are spread out from each other

a weighted average of all possible values that a variable can take on

the square root of the variance

18-What does a diagram of a perfectly positive correlation look like?

A curved line that slopes from the bottom left to the top right quardrant

A perfectly straight line that slopes from the bottom left to the top right quardrant

A perfectly straight line that slopes from the top left to the bottom right quardrant

A scatter plot that have dots all over the place