Quant R1_2

An investor deposits £2,000 into an account that pays 6% per annum compounded continuously. The value of the account at the end of four years is closest to:

• 2525
• 2542
• 2854

Using a discount rate of 5%, compounded monthly, the present value (PV) of $5,000 to be received three years from today is closest to

• $4,250
• $4,319
• $4,305

If the price of a stock goes from $15.00 to $16.20 in one year, the continuously compounded rate of return is closest to

• 0.077
• 0.0833
• 0.08

The geometric mean return for Fund Y is closest to

• 14.9 percent
• 15.6 percent
• 19.5 percent

A portfolio manager invests EUR5,000 annually in a security for four years at the following prices. The average price is best represented as the:

• harmonic mean of EUR76.48
• geometric mean of EUR77.26
• arithmetic average of EUR78.00

Which of the following statements regarding arithmetic and geometric means is correct?

• The geometric mean will exceed the arithmetic mean for a series with non-zero variance.
• The geometric mean measures an investment’s compound rate of growth over multiple periods.
• The arithmetic mean measures an investment’s terminal value over multiple periods.

A fund receives investments at the beginning of each year and generates returns for three years as follows. Which return measure over the three-year period is negative?

• Geometric mean return
• Time-weighted rate of return
• Money-weighted rate of return

An investor purchases one share of stock for $85. Exactly one year later, the company pays a dividend of $2.00 per share. This is followed by two more annual dividends of $2.25 and $2.75 in successive years. Upon receiving the third dividend, the investor sells the share for $100. The money-weighted rate of return on this investment is closest to:

• 0.0797
• 0.0815
• 0.0863

A USD25 million equity portfolio is financed 20 percent with debt at a cost of 6 percent annual cost. If that equity portfolio generates a 10 percent annual total investment return, then the leveraged return is:

• 11.0 percent
• 11.2 percent
• 13.2 percent

The quarterly returns on a portfolio are as follows. The time-weighted rate of return of the portfolio is closest to:

• −5.0%
• −1.3%
• 0 percent