第1題1.1.

ChoosethecorrectdefinitionofafinancialinstrumentARealorvirtualdocumentrepresentinganagreementthatisnotprotectedbylawBOnlyarealdocumentprintedonapieceofpaperrepresentinganagreementthatisnotprotectedbylawCRealorvirtualdocumentrepresentingalegalagreementinvolvingsomesortofmonetaryvalueDOnlyarealdocumentprintedonapieceofpaperrepresentingalegalagreementinvolvingsomesortofmonetaryvalue第2題1.2.Whichgroupoffinancialinstrumentsrelatestomoneymarket?ACommonstocksBPreferredstocksCCertificatesofdepositDLong-termbonds第3題1.3.Whichgroupoffinancialinstrumentsrelatestocapitalmarket?APromissorynotesBShort-termbondsCTreasurybillsDCommonstocks第4題1.4.MarktheCORRECTstatement:AAsagroup,householdsactasnetborrower-spendersatfinancialmarketsBGerman(continental)modelisbasedondebtratherthanequityfinancingCDerivativesincludedepositoryreceiptsandmortgage-backedsecuritiesDFinancialmarketsincludeforeignexchange,derivativesandcommoditiesmarkets第5題1.5.Choosetheproperdefinitionofopportunitycostofcapital:AReturnofferedbyanalternativeinvestmentwiththesameriskBPresentvalueofunrealizedcapitalinvestmentsCNetpresentvalueofthebestinvestmentopportunitydismissedbyinvestorDInterestrateonabankdeposit第6題1.6.Whatiseconomicprofit?ARevenueminusCOGSBTotalprofitnetoftotalcostsCThesameastheaccountingprofitDTotalprofitnetoftotalcosts,includingopportunitycosts第7題1.7.Lawofonepriceimpliesthat:AIfequivalentinvestmentopportunitiesaretradedindifferentcompetitivemarkets,thentheymusttradefordifferentpricesineachmarketBIfnon-equivalentinvestmentopportunitiesaretradedindifferentcompetitivemarkets,thentheymusttradeforthesamepriceinbothmarketsCIfequivalentinvestmentopportunitiesaretradedindifferentcompetitivemarkets,thentheymusttradeforthesamepriceinbothmarketsDSustainablearbitrageopportunitiesexistinopenandcompetitivemarkets第8題1.8.SupposeacommercialbanksellsEURUSDfor1.1810andbuysfor1.1850(thequoteisgivenindollarsfor1euro).Arethereanyarbitrageopportunities?ANo,therearenoarbitrageopportunitiesinthiscaseBYes,thereisanarbitrageopportunity:buyeurosat1.1810andsellfor1.1850immediatelyCYes,thereisanarbitrageopportunity:selleurosat1.1850andwaituntiltheexchangerategoesdownDYes,thereisanarbitrageopportunity:buyeurosat1.1810andwaituntiltheexchangerategoesup第9題1.9.Yourbankpays5%perannumwithsemi-annualcompounding.Whatistheeffective(equivalentannuallycompounded)annualrateofreturnonyoursavings?A2.50%B5.00%C5.06%D7.48%第10題1.10.Allothersequal,whatwouldincreasethepresentvalueofagrowingannuity?ADecreaseofthegrowthrate(g)BDecreaseoftheinterestrate(r)CDecreaseoftheinitialpayment(C)DDecreaseofthenumberofpayments(n)第11題1.11.Supposeyouneedtopay$920eachyearforthenext6years.WorkoutthePVofthiscashflowiftheinterestrateis5%perannum.A$4,823B$13,731C$4,699D$18,400E$5,520第12題1.12.Supposeyouareofferedapaymentof$120nextyear,thengrowing3%eachyear(infinitely).WorkoutthePVofthiscashflowiftheinterestrateis7%perannum.A$1,200B$1,714C$2,400D$3,000E$4,000第13題1.13.Supposethenominalinterestrateis14%andtheinflationrateis5%perannum.Calculatetherealannualinterestrate(usethepreciseformula).A2.8%B8.6%C9.0%D15.2%E19.0%第14題1.14.Supposetherealinterestrateis11%andtheinflationrateis6%perannum.Calculatethenominalannualinterestrate(usetheapproximateformula).A18.3%B17.7%C16.6%D17.0%E5.0%第15題1.15.Whichtypeofexpendituresisnotconsideredineconomicandfinancialdecision-making?AOpportunitycostBCostofinvestmentCMarginalcostDSunkcost第16題1.16.MarktheINCORRECTstatement:AIncaseofdeflation,realinterestratesarehigherthannominalratesBAriskycashflowshouldhaveahigherPVthanasafeoneCImmediatecashflowsarealwaysvaluedhigherthanidenticaldelayedpaymentsDBonds,billsofexchangeandOTCderivativesaretheexamplesoffinancialinvestment第17題1.17.Choosethemostliquidassetfromthelistbelow:A

Short-termgovernmentbondsBRealestateCPrivateequityDPhysicalgold第18題1.18.Whichtypeofcompoundingprovidesthehighesteffectiveannualinterestrate?ANocompoundingBAnnualcompoundingCQuarterlycompoundingDContiniouscompounding第19題1.19.Supposeyouhavetakenoutabankloan.Whatisthenameofthecashflowyouarelikelytopay?APerpetuitywithfixedpaymentBPerpetuitywithconstantlygrowingpaymentCAnnuitywithfixedpaymentDAnnuitywithconstantlygrowingpayment第20題1.20.Supposeyouhavetakenoutamortgageloanwithfixedmonthlypayment.Markthecorrectstatementaboutthedistributionbetweenprincipalandinterestrepaymentonyourloan.AFirstyoupayalltheinterest,thenrepayallthefacevalueoftheloanBEachmonthlypaymentcontainsinterestandprincipalrepayment,thesepaymentsaredistributedinequalpartsCEachmonthlypaymentcontainsinterestandprincipalrepayment,thedistributionbetweenthemchangeseverymonthDFirstyourepayallthefacevalueoftheloan,thenalltheinterest第1題2.1.Findthecorrectdefinitionofspotrate:AInterestrateapplicabletoafinancialtransactionthatwilltakeplacein3monthsBInterestrateapplicabletoanimmediateinvestmenttransactionCInterestrateapplicabletoafinancialtransactionthattookplaceinthepastDInterestrateapplicabletoafinancialtransactionthatwilltakeplaceinthefuture第2題2.2.Whatistheyieldtomaturityofa4-yearzero-couponbondifitiscurrentlytradedat84%ofitsfacevalue?A8.0%B4.5%C8.9%D4.0%第3題2.3.ChooseanINCORRECTstatement:AYield-to-RefinancingistheyieldtothedatewhenthebondcanberefinancedbytheissuerBYield-to-WorstistheyieldthatisthehighestofthepossibleyieldsCYield-to-Callistheyieldtothenearestdatewhenthebondcanbecalledbytheissuer(forcallablebondsonly)DYield-to-Maturityisthetotalannualreturnanticipatedonabondifabondishelduntilmaturity,withallpaymentsmadeasscheduledandreinvestedatthesamerate第4題2.4.Supposethespotratesfor1,2and3yearsare5%,8%and13%respectively.Workoutthe1-yearforwardrateforthe3-rdyear(i.e.theyearstarting2yearsfromnow):A10.7%B23.7%C13.4%D13.0%第5題2.5.Whatkindofriskismeasuredbymodifiedduration?ACreditriskBInterestrateriskCCurrencyriskDNon-systemicrisk第6題2.6.Chooseacorrectformulafortheoreticalequityprice(perpetuity).ABCD第7題2.7.WhatisessentialforGordonGrowthModel?ArE<gBrE>gCrE<0Dg=ROE?(1+PayoutRatio)第8題2.8.IfROE>rE:Aacompany'sbusinesscreatesnovalueBexternalreturnishigherthaninternalreturnCacompany'sbusinessgenerateseconomicprofitDacompany'sbusinessgenerateseconomicloss第9題2.9.AssumethatPVGO>0.Findacorrectmanagerialdecision.ANotenoughdatatomakeadecisionBNodecisionwillbringbenefitsCDecreasepayouttoincreaseequityvalueDIncreasepayouttoretainshareholders第10題2.10.ABCreinvests30%ofnetearningsintoitsmainbusinessthatprovidesstablereturnonequity(ROE)of14%.Workoutthegrowthrateofthecompany'searningsanddividends(g)ifthemanagerswon'tchangetheirpayoutpolicyintheforecastablefuture:A4.2%B9.8%C10.8%D14.0%Homework3第1題3.1.StocksXandYhavetheexpectedreturnsof17%and26%respectively.Thestandarddeviationsofthesestocks'returnsare32%and41%respectively.Workouttheexpectedreturnoftheinvestmentportfoliowhichcontains1/3stockXand2/3stockY.A23.0%B21.5%C17.0%D20.0%第2題3.2.Usingthedatafromquestion1,workoutthestandarddeviationoftheinvestmentportfolioifthereturnsofXandYareuncorrelated.A36.5%B16.1%C29.3%D23.0%第3題3.3.WhichtypeofriskCANNOTbeeliminatedbydiversification?ASystemicriskBInterestrateriskCCompany-specificriskDCreditrisk第4題3.4.Allothersequal,whathappenstotheoverallportfolioriskifthecorrelationbetweenthereturnsoftheassetsinthisportfoliogoesup?AItdoesn'tchangeBItmayeitherincreaseordecreaseCItdecreasesDItincreases第5題3.5.Findacorrectcorrelationformula:ABCD第6題3.6.WhichofthefollowingassumptionsdoesNOTholdfortheportfoliotheory?AInvestorscanonlyholdlongpositions,shortsellingisnotallowedBRiskandreturnaremeasuredbasedonhistoricalpricesCTherearenotaxes,fees,commissions,etc.DInvestorscaninvestinriskyandrisk-freeassets第7題3.7.AccordingtotheMarkowitzmodel,whatistheefficientsetofportfoliosifinvestorsdon'thavetheopportunitytoinvestattherisk-freerate?ASecuritymarketlineBMean-standarddeviationfrontierCEfficientfrontierDCapitalmarketline第8題3.8.Whattypeofriskofinvestinginasecurityiscapturedbystandarddeviation?ASystemicriskBBothsystemicandnon-systemicriskCNoneoftheseDNon-systemicrisk第9題3.9.StockBBBhastheexpectedreturnof10%,anditsstandarddeviationofreturnsequals18%.Therisk-freerateis2%,andthemarketreturnis7%.WorkouttheSharperatioforStockBBB:

A0.02B0.56C0.44D0.17第10題3.10.Youhaveconstructedaportfoliowiththestandarddeviationofreturnequalto30%.Itshistoricalcorrelationwiththemarketindexreturnis0.4.Whatistheportfoliobetaifthestandarddeviationofthemarketreturnis18%?A0.24B1.33C1.50D0.67Homework4第1題4.1.Supposeyouhold3/4ofyourfundsinTreasurybills,therestisinvestedintheETFthatreplicatesthebroadmarketindex.Whatisthebetaofyourportfolio?A1.00B0.25C0.50D0.75第2題4.2.Usingthedatafromquestion1,workoutthestandarddeviationofyourportfolioreturnifthestandarddeviationofthemarketindexis26%:A6.5%B13.0%C1.0%D19.5%第3題4.3.Supposeyoufoundanoverpricedassetatthemarket.IntermsofCAPM,whereisitlocated?AAttheSML,totheleftofβ=1BAbovetheSMLCBelowtheSMLDAttheSML,totherightofβ=1

第4題4.4.MarktheINCORRECTstatement:AIfthestockreturnsarenegativelycorrelatedwiththemarket,itsbetawillbenegativeBCAPMisamodelofassetpricingequilibriumCIfastockhasβ<1,itsexpectedreturnislikelytobehigherthanthemarketreturnDInpractice,high-betastockstendtoshowthereturnslowerthanpredictedbyCAPM第5題4.5.WhatisthemainpointoftheRoll'scritiqueofCAPM?AEconomicagentsarenotrationalbynatureBTherelationshipbetweenriskandreturnisnon-linearCYoucannotestimatetheactualreturnofthemarketportfolioDThereisnorisk-freeassetavailableattherealmarket第6題4.6.WhichoftheseISNOTaknownCAPManomaly?AOfcourse.ReturnsofcompaniesfromdevelopingcountriesstrictlyfollowCAPMpredictionsBBluechips"generatehigherreturnscomparedto"growthcompanies"withthesamebetaCSmallcompaniesgeneratereturnshigherthanpredictedbyCAPMDReturnautocorrelationhistoricaldatacanbeusedtopredictfuturereturns第7題4.7.Whichofthestatementscorrectlycharacteri