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| 1. Options - which of the following statements is FALSE? |
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Definition
| A call option gives its owner the obligation to purchase a given asset at a fixed price at some future date. |
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| 2. Bonds - Which of the following statements is FALSE? |
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| A zero-coupon bond pays coupons. |
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| 3. Portfolio Theory and CAPM - Which of the following statements is FALSE? |
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Definition
| Well-diversified portfolios have large firm-specific risk. |
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| 4. Miscellaneous - Which one of the following statements is correct? |
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Definition
| The real rate takes into account inflation. |
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| 5. Time value of money and investment decision rules - Which of the following statement is FALSE? |
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Definition
| The payback rule is the investment decision rule that must always be followed. |
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| 6. Sustainability - Which one of the following statements is FALSE |
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Definition
| None of the other answers are correct. (This answer should be chosen if you consider that all the other statements are true). |
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7. The market portfolio - Suppose that the economy has only two risky assets given by the shares of two companies: Blue and Red. Blue has 250 shares and the price of each one of them is 10. Red has 50 shares and the price of each one of them is 100. Compute the weights of the market portfolio in this simple economy. (Round your answers to two decimal digits)
You need to show how you got to your final answers in order to get points for this question. JUST TYPING THE FINAL ANSWER WILL GIVE YOU ZERO POINTS. DO NOT UPLOAD A FILE. IF YOU DO SO, ITS CONTENT WILL BE IGNORED. YOU NEED TO ANSWER ON THE SPACE PROVIDED.
Fill in your answer here |
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8. Searching for an efficient portfolio - Your portfolio consists of a full investment in just one stock, IBM. Suppose this stock has an expected return of 19% and volatility of 40%. Suppose further that the tangency portfolio has an expected return of 12% and a volatility of 18%. Also, assume that the risk-free rate is 5%. Under the CAPM assumptions, what is the volatility of the alternative investment that has the lowest possible volatility while having the same expected return as your investment? (use two decimal digits in your final answer)
JUST TYPING THE FINAL ANSWER WILL GIVE YOU ZERO POINTS. DO NOT UPLOAD A FILE. IF YOU DO SO, ITS CONTENT WILL BE IGNORED. YOU NEED TO ANSWER ON THE SPACE PROVIDED.
Fill in your answer here |
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9. Standard deviation of a portfolio - What is the standard deviation for the following portfolio? The portfolio consists of 25% and 75% of stocks A and B respectively. The correlation between stock A and B is 0.4. (Round your answer to two decimal digits)
Stocks E[R]
A 17% 0.0169
B 13% 0.0361
Select one alternative: |
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Definition
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| 10. Options - Assume that you purchase 2 call options and 1 put option in the German company Tegernsee & Augsburg GmbH with a time to maturity of 3 months. The exercise price on the call options is SEK 70 and the exercise price on the put option is SEK 75. If the stock’s spot price at maturity is SEK 72, what is the total value of the portfolio at maturity? |
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11. Sharpe Ratio - You are an investment advisor and must choose one of the funds below as a recommendation to your clients. The clients will mix the fund chosen with the risk-free asset. The risk-free rate is 4%.
Expected return Volatility
Fund A 0,1 0,08
Fund B 0,07 0,02
Fund C 0,06 0,03
What fund should you recommend? |
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12. Zero-coupon bond - A zero-coupon bond has face value equal to 1000 and maturity in 18 months. Its yield-to-maturity if expressed as an EAR is equal to 5%. What is the price of this bond?
Select one alternative: |
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13. Enterprise value - A given firm has just presented the following figures corresponding to its current financial report.
EBIT 300
Depreciation 30
Increase in NWC 20
Investments 10
The applicable tax is 25%. From now on the FCF’s are expected to grow at the industry average of 2% forever. The weighted average cost of capital (WACC) is equal to 10%. What is the enterprise value?
Select one alternative: |
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Definition
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| 14. Payback period - You are the owner of a School of languages thinking of placing a sign advertising your business at a central location. The sign will cost 4000. You expect that it will generate additional revenue of 520 per month. The discount rate is 2%. What is the payback period closest to? |
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15. Perpetuity - You are thinking about purchasing a financial asset that provides a cash flow of 5384 SEK per year, in perpetuity.
What should be the price of this financial asset, assuming a discount rate of 7.2 percent?
(Answers are rounded to the nearest integer)
Select one alternative: |
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16. Expected return - In the next year, the economy can enter either a boom, a bust or remain in a normal state with the probabilities stated in the table. An investment has the following returns given the specific states:
Returns Probability
Boom 5% 0.25
Normal 12% 0.50
Bust 31% 0.25
What is the expected return of this investment?
Select one alternative: |
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17. Dividend/stock price - The company ”Vikasjö” announces that it will pay a dividend of 5 SEK/share in one year to its shareholders. An analyst has evaluated the stock and concluded that its cost of equity is equal to 14%. If the current price of the stock of ”Vikasjö” is equal to 30 SEK and the analyst conclusions are correct, what will you expect the stock to sell for in one year (after the dividend is paid)?
Select one alternative: |
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18. CAPM - Given the following information, what is the expected return of a stock with a beta of 1.8 assuming that CAPM is correct? The risk-free rate is equal to 5%.
Stock Beta Risk premium
A 0.8 10%
Select one alternative: |
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19. APR - Calculate the present value of SEK 5,000 that is received in 12 months, assuming an APR of 10% with quarterly compounding. (Answers rounded to two decimal digits)
Select one alternative: |
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20. Equivalent Annual Annuity - A company is considering a project that requires an initial outlay of 2050 SEK. The project will produce a first cash-flow of 500 SEK at the end of year 1 and then the subsequent yearly cash-flows will grow at a rate of 1% per year. The project has a lifespan of 8 years. Suppose that you know that the EAR rate is equal to 3.5%.
What is the EAA of this project? (Answers rounded to two decimal digits)
Select one alternative: |
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