Examen 1. Etapa 1 Quantitative Methods

An equity fund reported the following annual returns over five consecutive years: 8.3%, -2.1%, 11.4%, 5.5%, and 3.7%. The fund’s geometric mean annual return is closest to:

A stock’s price grew at the following annual rates over four years: 7.2%, 3.1%, 8.9%, and 2.1%. The stock’s geometric mean annual return is closest to:

Over a four-year period, an investment portfolio produced a cumulative (holding period) return of 27.6%. The portfolio’s annualized (compound annual) return is closest to:

The price of a share was $158.90 at the start of a period and $142.60 at the end of the same period. The continuously compounded rate of return over the period is closest to:

An analyst obtains the following annual returns for a mutual fund: Year 1 = 11%, Year 2 = -6%, Year 3 = 3%. The fund’s holding period return over the three-year period is closest to:

An investor buys one unit of a fund at the start of each of three consecutive years, paying $40, $50, and $80 per unit, respectively. The average cost per unit under a fixed-dollar (dollar-cost-averaging) purchase plan is best represented by the harmonic mean, which is closest to:

For a risky asset whose historical annual returns vary substantially from year to year, the relationship among the three Pythagorean means of those returns is best described as:

An investment manager’s gross return is best described as the return:

A 7-year corporate bond is priced using an 8.5% nominal discount rate. The real risk-free rate is 3.5%. The 5.0 percentage-point difference between the two rates is best attributed to premiums for:

An analyst observes the following historical geometric returns: equities 9.6%, corporate bonds 7.4%, Treasury bills 3.1%, and inflation 2.8%. Using the exact (multiplicative) method, the real rate of return on corporate bonds is closest to:

Using the same data (equities 9.6%, corporate bonds 7.4%, Treasury bills 3.1%, inflation 2.8%), the risk premium for equities relative to the risk-free rate, computed on a multiplicative basis, is closest to:

A fund reported a nominal annual return of 6.3% during a year in which the inflation rate was 2.2%. Using the exact method, the fund’s real rate of return is closest to:

An investor finances a security purchase partly with borrowed funds. Using leverage to enhance returns will:

An investor buys one share of a stock for $50. One year later she receives a $2 dividend and buys a second share for $54. At the end of the second year she receives $2 in dividends per share (on 2 shares) and sells both shares for $60 each. Assuming dividends are not reinvested, the investor’s money-weighted rate of return is closest to:

At the start of Year 1 a fund has $5 million under management and earns 15% for the year. At the start of Year 2 the fund receives an additional $95 million and earns only 4% for that year. Relative to its time-weighted rate of return, the fund’s money-weighted rate of return is most likely:

A newly issued 5-year corporate bond pays an 8% annual coupon on a semiannual basis (par value 100). Given a current annualized yield to maturity of 9%, the bond’s price per 100 of par value is closest to:

A stock currently trades at $75 per share and just paid an annual dividend of $3.00, which is expected to grow at 4% per year indefinitely. Using the constant-growth dividend discount model, the required rate of return on the stock is closest to:

One-year government debt yields 2.1% and two-year government debt yields 2.8% (both annually compounded, spot rates). Under the no-arbitrage condition, the implied one-year forward rate beginning one year from now is closest to:

The current spot exchange rate is USD/GBP 1.2700 (USD per GBP). The one-year risk-free interest rates are 4.5% for the US dollar and 5.5% for the British pound. The one-year USD/GBP forward rate that prevents arbitrage is closest to: