Q10: Which is not a measure to help evaluate and select among projects?
Q11: Let cells A1 to A3 contain:Risk-Free Rate (A1), beta of the investment (A2), Market Risk Premium (A3).
The Capital Asset Pricing Model (CAPM) can be calculated as:
Q12: Which is not a procedure of constructing a frequency distribution?
Q13: You have a loan principal of $100,000. The annual interest rate is 3% and the loan term is 30 years. Using the PMT() formula, calculate the amount of each annual payment.
Q14: Which of the statements about normal distribution is incorrect?
Q15: An asset's contribution to a portfolio's return is determined by its:
Q16: Which is not included in the CAPM?
Q17: Which statement about portfolio management is correct:?
Q18: You decide to make 8 annual investments of $2,500 each starting a year from now. Your aim is to accumulate $15,000 by the end of 6 years. To achieve this, you will need a rate of return of 20%. Which of the following Excel formula is applicable for this calculation?
Q19: Which statement is incorrect?
Q10: Which is not a measure to help evaluate and select among projects? PI YTM PBP...
Q13: You have a loan principal of $100,000. The annual interest rate is 3% and the loan term is 30 years. Using the PMT() formula, calculate the amount of each annual payment. $30,005.21 $5,036.20 $30,011.45 $5,101.93 Q14: Which of the statements about normal distribution is incorrect? The skewness must be 0 and kurtosis must be 3 for a normal distribution The mean, median, and mode are all the same in a normal distribution We can simply use mean and variance...
Which of the following is considered an example of unique circumstances in an IPS? Legal and regulatory Tax consideration Preference about investment duration Diversification needs You decide to make 5 annual investments of $2,000 each starting a year from now. Your aim is to accumulate $15,000 by the end of 5 years.To achieve this, you will need a rate of return of 20%. Which of the following Excel formula is applicable for this calculation? The NPV() formula The FV() formula...
Questions A1-A2 are based on the following information You are considering two projects that are independent. Your firm has access to $70,000 only. Cost of capital for both projects is 12%. Project A costs $40,000 and generates cash flows of $9,600 per year for 15 years. Project B costs $60,000 and generates cash flows of $12,000 per year for 15 years. A1. What is the MIRR for Project A? (a) 16.7% (b) 14.34% (c) 12.87% (d) 15.73% 21.98% A2. What...
1) Do projects that add more risk to our portfolio need to provide more reward? Do projects that have high variance need to provide more reward? What asset has a beta of zero? What is the appropriate market rate of return for such a security? 2) Does CAPM takes care of default risk? Does the use of CAPM E(r) in the NPV formula takes care of the default risk? 3) What are the CAPM inputs? How would you estimate them?...
4. Investor equilibrium The following graph shows the set of portfolio opportunities for a multiasset case. The point RF corresponds to a risk-free asset, the red curve BME is the efficient frontier, the shaded area under the efficient frontier represents the feasible set of portfolios of risky assets, and the yellow curves II and I2 are indifference curves for a particular investor. EXPECTED RATE OF RETURN (Percent) 10 RISK (Portfolio's standard deviation) The points on the line PRF MZ represent:...
Home assignment 4 Consider following information Probability of the state of economy Rate of return if state occurs StockA StockB boom normal a. b. c. 0.2 0.8 0.4 0.2 0.05 Calculate the expected return of Calculate the variance and standard deviation of each stock. Calculate the covariance between stock A and B returns and the correlation coefficient. Calculate the expected return of the portfolio (Portfolio!) consisting 40% of stock A and 60% of stock B. Calculate the variance and standard...
4. Investor equilibrium The following graph shows the set of portfolio opportunities for a multiasset case. The point Pre corresponds to a risk-free asset, the red curve BME is the efficient frontier, the shaded area under the efficient frontier represents the feasible set of portfolios of risky assets, and the yellow curves 11 and 12 are indifference curves for a particular investor. EXPECTED RATE OF RETURN (Percent) 10 RISK (Portfolio's standard deviation) Point A, where the line PRF MZ is...
1. Unless otherwise specified, please report answers in percent rounded to 2 decimal places (e.g. if the answer is .01235, report 1.25) a. Suppose our representative investor has a risk aversion coefficient A=2. If the standard deviation on the market is 20%, what is the market risk premium? b. We measure the beta of apple stock with the market at 0.9. If the market risk premium (E[m – r;]) is 8%, what is the expected excess return on apple? C....
Which of the following is correct regarding the CAPM? a. The CAPM implies that the return of an investor equals the market premium magnified by the portfolio’s beta plus the risk-free rate of return. b. The CAPM assumes investors are not rational and have certain behavioral biases. c. CAPM believes that a portion of total risk remains even after diversification. d. The CAPM assumes investors have modest transaction costs (including taxes).