Quantitative methods EOCQ Flashcards
(37 cards)
Grupo Ignacia issued 10-year corporate bonds two years ago. The bonds pay an annualized coupon of 10.7 percent on a semiannual basis, and the current annualized YTM is 11.6 percent. The current price of Grupo Ignacia’s bonds (per MXN100 of par value) is closest to
-MXN 95.47
-MXN 97.18
-MXN 95.39
-MXN 95.39
Grey Pebble Real Estate seeks a fully amortizing fixed-rate five-year mortgage loan to finance 75 percent of the purchase price of a residential building that costs NZD5 million. The annual mortgage rate is 4.8 percent. The monthly payment for this mortgage would be closest to:
- 70,424
- 93,899
-71,781
70,424
Mylandia Corporation pays/an annual dividend to its shareholders, and its most recent payment was CAD2.40. Analysts following Mylandia expect the company’s dividend to grow at a constant rate of 3 percent per year in perpetuity. Mylandia shareholders require a return of 8 percent per year. The expected share price of Mylandia is closest to:
- 48
-49.44
-51.84
49.44
Perp= ANEL DIVDADEND / RATE OR PRICE
Perp that is growing = Anel dividend (1+groth / rate or price - growth
Consider a Swiss Confederation zero-coupon bond with a par value of CHF100, a remaining time to maturity of 12 years and a price of CHF89. In three years’ time, q the bond is expected to have a price of CHF95.25. If purchased today, the bond’s expected annualized return is closest to:
- .58%
- 1.64 %
- 2.29 %
2.29 %
((FV/PV)1/T ) -1
Suppose Mylandia announces that it expects significant cash flow growth over the next three years, and now plans to increase its recent CAD2.40 dividend by 10 percent in each of the next three years. Following the 10 percent growth period, Mylandia is expected to grow its annual dividend by a constant 3 percent indefinitely. Mylandia’s required return is 8 percent. Based upon these revised expectations, The expected share price of Mylandia stock is:
- 49.98
- 55.84
59.71
59.71
Grupo Ignacia issued 10-year corporate bonds four years ago. The bonds pay an annualized coupon of 10.7 percent on a semiannual basis, and the current price of the bonds is MXN97.50 per MXN100 of par value. The YTM of the bonds is closest to:
- 11.28%
-11.5 %
-11.71 %
11.28%
They are asking for: I/Y
Mylandia Corporation stock trades at CAD60.00. The company pays/an annual dividend to its shareholders, and its most recent payment of CAD2.40 occurred yesterday. Analysts following Mylandia expect the company’s dividend to grow at a constant rate of 3 percent per year. Mylandia’s required return is:
- 8 %
-7%
-7.12%
59.71
r= (DIVID (1+GROTH)/ STOCK PRICE) +GROTH
(2.4(1.03)/60) +.03
An analyst observes the benchmark Indian NIFTY 50 stock index trading at a forward price-to-earpings ratio of 15. The index’s expected dividend payout ratio in the next year is 50 percent, and the index’s required return is 7.50 percent. If r the analyst believes that the NIFTY 50 index dividends will grow at a constant rate of 4.50 percent in the future, which of the following statements is correct?
A. The analyst should view the NIFTY 50 as overpriced.
B. The analyst should view the NIFTY 50 as underpriced.
C. The analyst should view the NIFTY 50 as fairly priced.
The analyst should view the NIFTY 50 as underpriced.
P/E = Dividend payout ratio / Required return - Groth rate
Italian one-year government debt has an interest rate of 0.73 percent; Italian two-year government debt has an interest rate of 1.29 percent. The breakeven one-year reinvestment rate, one year from now is closest to:
A. 1.01 percent.
B. 1.11 percent.
C. 1.85 percent.
1.85 percent.
Forword rate= ((1+2nd rate) ^ year / 1+ 1st rate) -1
1.0129^2/1.0073 - 1
if there is more than 2 years
Forword rate= ((1+2nd rate) ^ year / 1+ 1st rate) -^1/ the difference in the years
What is Jackknife resampling
Analysts performing bootstrap analysis seek to create statistical inferences of population parameters from a single sample. Bootstrapping through random sampling generates the observed variable from a random sampling with unknown population parameters24. Bootstrap is a powerful statistical technique widely used in investment models to estimate the uncertainty associated with model predictions
The current exchange rate between the euro and US dollar is USD/EUR1.025.
Risk-free interest rates for one year are 0.75 percent for the euro and 3.25 percent for the US dollar. The one-year USD/EUR forward rate that best prevents arbitrage opportunities is:
A. USD/EUR1.051.
Suso/fun
= 1.025
B. USD/EUR1.025.
C. USD/EUR0.975.
A. USD/EUR1.051.
Suso/fun
In Contrast to normal distributions, lognormal distributions:
- are skewed to the left
- have outcomes that cannot be negative
- are more suitable for describing asset returns than asset prices
- have outcomes that cannot be negative
The Lognormal distribution is a more accurate model for the distribution of stock prices than the normal distribution because stock prices are:
- symmetrical
-unbounded
-non-negative
-non-negative
Analysts performing bootstrap:
-Seek to create statistical inferences of population parameters from a single sample.
- repeatedly draw samples of the same size, with replacement, from the original population.
- must specify probability distributions for key risk factors that drive the underlying random variables.
-Seek to create statistical inferences of population parameters from a single sample.
Which one of the following statements is true about non - probability sampling?
- There is significant risk that the sample is not representative of the population
- Every member of the population has an equal chance of being selected for the sample
- using judgment guarantees that population subdivisions of interest are represented in the sample
- There is significant risk that the sample is not representative of the population
The best approach for creating a stratified random sample of a population involves:
- drawing an equal number of simple random samples from each subpopulation
- selecting every KTH member of the population until the desired sample size is reached
- drawing a simple random samples from each subpopulation in sizes proportional to the relative size of each subpopulation
- drawing an equal number of simple random samples from each subpopulation
A population has a non-normal distribution with mean MOUE and variance sigma^2. The sampling distribution of the sample mean computed from samples of large size from that population will have:
- the same distribution as the population distribution
- is mean approximately equal to the population mean
- it’s variance approximately equal to the population variance
- is mean approximately equal to the population mean
A sample mean is computed from a population with a variance of 2.45. The sample size is 40. the standard error of the sample mean is closest to:
- .039
- .247
-.387
- .247
√2.45 / √ 40 = .247
Compared with bootstrap resampling, jackknife resampling:
- is done with replacement
- usually requires that the number of repetitions is equal to the sample size
- produces dissimilar
results for every run because resamples are randomly drawn
- usually requires that the number of repetitions is equal to the sample size
An analyst suspects that, in the most recent year, excess returns on stocks have fallen below 5%. She wants to study whether the excess returns are less than 5%.
Designating the population mean as u, which hypotheses are most appropriate for her analysis?
A. Ho: = 5% versus Ha: 4 # 5%
B. Ho: u≥ 5% versus Ha: M < 5%
5%0
C. Ho: ≤ 5% versus Ha > 5%
B. Ho: u≥ 5% versus Ha: M < 5%
5%0
Which of the following statements about hypothesis testing is correct?
- The null hypothesis is that the condition a researcher hopes to support
- The alternative hypothesis is the proposition considered true without conclusive evidence to the contrary
- the alternative hypothesis exhausts all potential parameter values not accounted for by the null hypothesis.
- the alternative hypothesis exhausts all potential parameter values not accounted for by the null hypothesis.
if a researcher selects a 5% level of significance for a hypothesis test, the confidence level is:
- 2.5%
- 5%
-95%
-95%
level of significance is = to alfa
1- 5%= 95%
A hypothesis test for a normally distributed population at a .05 significance level implies a:
- 95% probability of rejecting a true null hypothesis
- 95% probability of a type 1 error for a two tailed test.
- 5% critical value rejection region in a tail of the distribution for a one tailed test.
- 5% critical value rejection region in a tail of the distribution for a one tailed test.
