Question II'lCDITECt ? W.
1 Mark I] out of 5'.
Suppose you pay QED for a $1 £1,000 per Treasury Bond maturing in 2 months. What is the effective annu ai percentage
rate of return for 1this investment?I
Select one:
"f a. 3.0G‘ia
G) b. 3.09% X Your answer i
Ebrract 1? Flag question
Question
2 Mark2outof2
The _ the variance of returns, everything else remaining constant. the _ the dispersion of expectations and the _
the risk
Select one:
CD a. Larger, greater, highersf Your answer is correct!
' b. Larger, g
Dorrect 1? Flagquestion
1 MarkZ suture
Between 1986 and 1996, the standard deviation of the returns for the NYSE and the EULA. indexes were GL1 ﬂ and {1.09,
respectively, and the oovarianoe of these index retums was 0.0009. What was the correlation coeffi
Don'sct
Question
9 Mark 2.00 out of EDD
The most appropriate discount rate to use when applying tine Operating Free Cash Flow model is the firm‘s
Select one:
" a. required rate of return based on the capital asset pricing model [@PW.
" is. required rate
Tutorial 8
During the tutorial, step-by-step derivations are shown.
1a.
PA = 231/23 = approx. 10.04
A = approx. 297.07
1b.
PA = 8, PB = 11, = 854
PB = 272/23 = approx. 11.826
B = approx. 529.38
1c.
The prices of both products are lower when produced by on
ECO2MEC
Managerial Economics
Tutorial 6 Week 8
Product differentiation
Prepare your answers before coming to the tutorial.
Consider a small town in the middle of nowhere. There is only one street in the town,
one kilometer long running straight from east
ECO2MEC
Managerial Economics
Tutorial 1 Week 3
Basic economic concepts
Prepare your answers before coming to the tutorial.
1. The cost function of a firm is given by c(q) = (2/3)q3 8q2 + 48q + 20 where q is the
firms output, and the revenue function is gi
ECO2MEC
Managerial Economics
Tutorial 4 Week 6
Basic game theory
Prepare your answers before coming to the tutorial.
1. A and B are playing a simultaneous-move game. A can choose either High or Low and B can
choose either Near or Far. If A chooses High an
Question mrrect Ir Hag question
3 Mark 2 out of 2
A portfolio is considered to be efﬁcient it:
Select one:
'_ a. No other portfolio offers higher expected returns with the same risk
' b. No other portfolio offers lower risk with the same expected return
'
I I ‘ In "'"
MarkZoutofE
The most important cn'terie when adding new investments to a portfolio is the—
Select one:
' a. Expected return of the new investment
' b. Standard deviation of the new investment
E c. Correlation of the new investment with the po
Question mm
‘3' Flag question
1 D MarkZ crLItofi
A portfolio is composed of two shares. A and B. Share A has a standard deviation of return of 24% while share B has a
standard deviation of return of 18%. Share A com pn‘aee 50% of the portfolio while aha r
Question Dermot 1? Flag question?
1 2 Markimtofz
Factor E(Rm}-Rf 5MB HML
Sensitivity bi = den si = {1.44 hi = [1.23
Risk premium 15% £95 4%
An asset hes the above sensitivities to the market portfolio, firm size, and hook—tormerket nsk premium. The risk—f
1ir‘v'hich of the foiiowing statements is correct?
Select one:
G) 3. Both the CAPM and the APT state that there is a linear relation between risk and expected return. «f ‘r'our answer
is correctI
' c. The CAPM is considered to be iess restrictive than the
Mark2 autofi
The unsystematic risk which can be eliminated and the market risk is the
Select one:
" a. aggregate risk
(9 h. remaining risksf' Your answer is correct!
" c. effective risk
_" d. ineffective risk
Your answer is correct.
The correct answer is:
II I -.- -
2 Mark2crutof2
The expected return for a stock, calculated using the CAPMi is 1 0.5%; The ma rket return is 915% and the beta of the stock
is ‘I .50. Calculate the implied risk—free rate.
Select one:
' a. 14.33%
' b. 13.91%
' c.1150q-E.
IE} (
Garrett F Flag queetiei
Question
5 Mark2cutnf2
The expected return fcra stack. calculated using the CAPM. is 25%. The risk free rate is 15% and the beta of the stock is
ELSE. Eaicuiate the impiied market risk premium.
Select one:
' a. 151%
' b. 14.38%
(
LIES-tin” LAJIIULTI. T ring IILIISHLILII
8 Mark 2 out of 2
According to the APE the value of the ﬁrm-speciﬁc factor is expected to be, on average
Select one:
IE) 3. zero. «f er answer is correct!
" - tr. more important than the value of the common factors
Correct '1’ Flag question
in regression of capital asset pricing modei, the intercept of excess returns is classiﬁed as
Select one:
' a. Tenors reward to volatiiity ratio
(E) b. Jensen's sipha J Your answer is correct!
' - c. Sharpe‘s reward to 1trans bii
correct 'F Flag question-
Question
4 Markimtofﬂ
Arbitrage opportunity means you can earn a positive return with
Select one:
{El 3. zero initial investment and zero risk. q!“ Your answer is correct!
" b. positive initial investment and iow risk.
' c. pos
Don'sct 17 Flag question
6 Mark 2 out of 2
In a two stock portfolio, if the correlation coefﬁcient between two stocks were to decrease over time. everything else
remaining constantr the portiolio‘s risk would
Select one:
' a. Increase
(3) b. Decrease q" Y
ECO2MEC
Managerial Economics
Tutorial 2 Week 4
Monopoly and perfect competition
Prepare your answers before coming to the tutorial.
1. A monopolist firm faces the demand for its product qD = 180 4p where p is the unit
price of the product. The firms cost
ECO2MEC
Managerial Economics
Tutorial 5 Week 7
Duopoly
Prepare your answers before coming to the tutorial.
Prepare your answers for Q2 on a separate sheet of paper for submission at
the tutorial.
Your submission will be assessed and count 10% towards your
Tutorial 6
During the tutorial, step-by-step derivations are shown and diagrams are drawn.
a. (Refer to the lecture notes and the textbook.)
b. (Refer to the lecture notes and the textbook.)
c. 425 meters from the west end
d. $21.75
e. $8.25
f. 10 extra h
TUTORIAL 5 - QUESTIONS
Chapter 8
The efficient market hypothesis
Question 1
If markets are efficient, what should the correlation coefficient be between stock returns for
two non-overlapping time periods?
Question 12
Steady Growth Industries has never mis
Tutorial 3 Questions
Chapter 5
Assume that you manage a risky portfolio with an expected rate of return of 17% and a
standard deviation of 27%. The T-note rate is 7%.
Question 11.
a. Your client chooses to invest 70% of a portfolio in your fund and 30% in
Formula Sheet
HPR = [PS PB + CF] / PB
n
n
HPR avg = (1 + HPR T )
T =1
HPR T
n
T =1
HPR avg =
1/ n
1
J
V
HPR avg = HPR I I
TV
I =1
2 = p(s) [r(s) E(r)]2
() = () ()
n
HPR T
n
T =1
r=
2 =
s
1 n
(ri r)2
n 1 i=1
r(real) r(nominal) i
E (rp ) rf = 0.5 A
Tutorial 10 - Questions
Chapter 10
Managing Bond Portfolios
Question 9
Find the duration of a 6% coupon bond making annual coupon payments if it has three years
until maturity and a yield to maturity of 6%. What is the duration if the yield to maturity is
Tutorial 9 - Questions
Chapter 9
Question 3:
A bond with an annual coupon rate of 5.20% sells for $970. Whats the bond current yield?
Question 10
A coupon bond paying semi-annual interest is reported as having an ask price of 122 % of its
$ 1,000 par valu
SOLUTION TUTORIAL 9
Chapter 9
Bond Valuation
Question 3
Current yield = 52/970 = 5.36%
Question 10
Semi-annual coupon = 1000 x 0.08 x 0.5 = $40. One month of accrued interest is 40 x (30/182) =
6.593. At a price of 122 the invoice price is 1220 + 6.593 =
Tutorial 2-Solutions
Chapter 6
Optimal Diversification
PROBLEM SETS
SOLUTIONS
Question 1
So long as the correlation coefficient is less than 1.0, the portfolio will contain diversification
benefits. These combinations will result in a portfolio with a low
TUTORIAL 8 QUESTIONS
MACROECONOMICS AND INDUSTRY ANALYSIS
Question1
What are the differences between bottom up and top down approaches to security valuation?
What are the advantages of a top down approach?
Question 6
If the nominal interest rate is 7 % an
TUTORIAL 5 - SOLUTION
Chapter 8
The Efficient Market Hypothesis
PROBLEM SETS
Question 1
The correlation coefficient should be zero. If it were not zero, then one could use returns from one
period to predict returns in later periods and therefore earn abno