Quiz 3 - Week 4 Attempt review BFF3121 PDF

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Quiz 3 - Week 4 Attempt review BFF3121 for weekly quizzes...

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8/21/2021

Quiz 3 - Week 4: Attempt review

BFF3121 - Investments and portfolio management - S2 2021

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At the beginning of this year, you purchased a share for $45. At the end of the year, you received $1 as a dividend and sold the share for $38. What was your holding-period return? Select one: -15.80% 13.33% 

-13.33% 14.56% -13.57%

HPR = ($38 - $45 + $1)/$45 = -0.1333 = -13.33%

Which of the following statement is true? Select one: Inflation has no effect on the nominal rate of interest Government budget deficit drives the interest rate down Certificates of deposit offer a guaranteed real rate of interest Real rate can never take a negative value None of the options is true



Expected inflation rates are a determinant of nominal interest rates. Government budget deficit drives the interest rate up. Certificates of deposit contain a real rate based on an estimate of inflation that is not guaranteed. Real rate can be negative if the rate of inflation is higher than the nominal rate

An investment generated the following annual returns over the past five years: Year

Return

1

10%

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Quiz 3 - Week 4: Attempt review

2

12%

3

8%

4

15%

5

-2%

The geometric average return of this investment is Select one: 6.84% 4.28% 7.40% 7.32% 

8.44%

Geometric average = [(1.10 x 1.12 x 1.08 x 1.15 x 0.98) 1/5] – 1 = 0.0844 = 8.44%

At the beginning of this year, you purchased a share for $65. At the end of the year, you received $3 as a dividend and sold the share for $74. What was your holding-period return? Select one: 14.56% 15.80% 17.25% 

18.46% None of the options

HPR = ($74 - $65 + $3)/$65 = 0.1846 = 18.46%

You have been given this probability distribution for the holding-period return for KMP stock:

What is the expected standard deviation for KMP stock? Select one: 7.25% 8.13%



8.85% 6.91% 7.79%

Expected HPR = 0.30 (0.18) + 0.50 (0.12) + 0.20 (-0.05) = 0.1040 = 10.40% https://lms.monash.edu/mod/quiz/review.php?attempt=21111443&cmid=8925782&print=1

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Standard deviation = [0.30 (0.18 – 0.1040) 2 + 0.50 (0.12 – 0.1040) 2+ 0.20 (-0.05 – 0.1040) 2] 0.5= 8.13%

You have been given the following probability distribution for the holding-period return for KMP stock:

What is the expected holding-period return for KMP stock? Select one: 11.54% 

10.40% 11.63% 9.32% 10.88%

Expected HPR = 0.30 (0.18) + 0.50 (0.12) + 0.20 (-0.05) = 0.1040 = 10.40%

If the annual real rate of interest is 3.5% and the expected inflation rate is 3.5%, the nominal rate of interest would be approximately Select one: 12.25% 9% 3.5% 

7% 0%

Nominal rate = 3.5% + 3.5% = 7%

Ceteris paribus, a decrease in the demand for loanable funds Select one: results from a decrease in the level of savings results from an increase in business prospects drives the interest rate up drives the interest rate down



might not have any effect on interest rates

A decrease in demand, ceteris paribus, always drives interest rates down. An increase in business prospects would increase the demand for funds. The savings level affects the supply of, not the demand for, funds  https://lms.monash.edu/mod/quiz/review.php?attempt=21111443&cmid=8925782&print=1

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The holding-period return (HPR) on a share is equal to Select one: the capital gain yield during the period, plus the inflation rate the dividend yield, plus the risk premium 

the capital gain yield during the period, plus the dividend yield the current yield, plus the dividend yield the change in stock price

The HPR of any investment is the sum of the capital gain and the cash flow over the period,which for common stock is dividend.

Over the past year you earned a nominal rate of interest of 8% on your deposit. The inflation rate was 3% over the same period. The exact actual growth rate of your purchasing power was 1. Over the past year you earned a nominal rate of interest of 8% on your deposit. The inflation rate was 3% over the same period. The exact actual growth rate of your purchasing power was

Select one: 5.85% 5.70% 5.55% 4.85%



4.10%

Real growth rate = (1+ r nom)/(1+i) - 1 = (1.08/1.03) - 1 = 0.0485 = 4.85% Or, Real rate = (rnom –i)/(1+i) = (0.08-0.03)/(1.03) = 0.0485 = 4.85%

◄ Assessment Information Book Jump to... Assignment 1 - Stock name (No submission) ►

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