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:
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?
Q13:
Given,
Loan principal (P) = $ 100000
Interest rate (r) = 3% or 0.03
Loan term (n) = 30 years
Solution :-
Q13: You have a loan principal of $100,000. The annual interest rate is 3% and the...
Q10: Which is not a measure to help evaluate and select among projects? PI YTM PBP IRR 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: =A1+A3 =A1-A3 =A1+A2*A3 =A1-A2*A3 Q12: Which is not a procedure of constructing a frequency distribution? Assign observations to the appropriate interval Calculate the absolute frequency Define the intervals Count the observations Q13: You have a...
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...
1. a. Two investors, A and B, are evaluating the same investment opportunity, which has an expected value of £100. The utility functions of A and B are ln(x) and x2, respectively. Which investor has a certainty equivalent higher than 100? Which investor requires the higher risk premium? b. (i) Describe suitable measures of risk for ‘loss-aversion’ and ‘risk aversion’. (ii) Concisely define the term ‘risk neutral’ with respect to a utility function u (w), where w is the realisation...
3. You have a risky portfolio that yields an expected rate of return of 15% with a standard deviation of 25%. Draw the CAL for an expected return/standard deviation diagram if the risk free rate is 5%. a. What is the slope of the CAL? b. If your coefficient of risk aversion is 5, how much should you invest in the risky portfolio? 4. A pension fund manager is considering three mutual funds. The first is a stock fund, the...
1.3 (5 points) Two stocks have the following expected returns and standard deviations Stock Stock Expected return Standard Deviation A 10% 12% B 15% 20% Consider a portfolio of A and B, and let w, and wg denote the portfolio weights of these two assets, with W + W, =1. Suppose that the correlation between the expected returns on A and B is equal to 0.3. Use these data to construct the portfolio of A and B with the lowest...
can I please have answer with solutions? thank you! Stocks with higher market risk should have higher returns. True 40.) Aztec stock two times risky as the market on average. Given the market risk premium of 10%, a risk freera using CAPM what is the expected return of Aztec? 41.) You purchased a share of stock for $35.40 seven years ago, and sold it today for $58.37. No dividends were paid out of the seven years, but you did receive...
An investor is faced with two risky asset portfolios (each of which is highly diversified within its asset class) an equity fund and a bond fund. The investor is aware that asset returns are not always normally distributed, but is nonetheless prepared to use the normal distribution as a tool for the estimation of approximate portfolio risks and expected returns. The equity fund has a forecast expected return of +11 % pa over the time horizon of 12 months, and...
You must choose between investing in Stock A or Stock B. You have already used CAPM to calculate the rate of return you should expect to receive for each stock given each one's systematic risk and decided that the expected return for both exceeds that predicted by CAPM by the same amount. In other words, both are equally attractive investments for a diversified investor. However, since you are still in school and do not have a lot of money, your...
4. Interest rate parity The rise of globalization is due to the many companies that have become multinational corporations for various reasons-for example, to access better technology, to enter new markets, to obtain more raw materials, to find funding resources, to minimize production costs, or to diversify business risk. This multimarket presence exposes companies to different kinds of risk as well-for example, political risk and exchange rate risk. The relationship between interest rates and exchange rates can be represented through...
You are managing an investor's account with $200,000. Investor's goal is to minimize the total risk. Possible investment options, expected rate of return, and risk indices of the investment options are given below. Stock Fund Money Market Fund 2% 0.04 12% Return Risk(unit/S) 0.25 Investor needs an annual income of $14000 Formulation: Dec Var: S- $to be invested in Stock Fund, M-.. in MM Obi. Function: Min (Total Risk) Min .25S+.04M Constraints: Budget: SM Return(Income): 0.12S+0.02M $14,000 Questions: (a) Average...