Annales finance 2009 2010 esc

2434 mots 10 pages
Sample exam solutions
Sample exam #1: 20 questions Sample exam #2: 20 questions Sample exam #3: 20 questions

Sample exam #1

QUESTION 1
A stock’s price on December 1 was \$50, and on December 31 of the same year it was \$40. The stock also paid a \$2 dividend in December. What was this stock’s rate of return in December?

(40+2-50)/50= -16%.

A. B. C. D. E. F.

-16% -20% -21% -24% -25% -30%

Sample exam #1

QUESTION 2
The graph below shows the market price of assets A, B, and C recorded at monthly intervals over the course of one year. None of these assets paid dividends during this year. Based on this graph, rank these three assets from the lowest standard deviation of returns to the highest.

Monthly prices of assets A, B, and C
70 60 50

We do not have the exact returns so we cannot calculate the standard deviations exactly. It is nonetheless easy to see that returns on Asset B are the least volatile of the three assets. Choosing between A and C, clearly A has the higher volatility of returns. So B is the least risky, followed by A, and followed by C. NB: if you are curious, the actual standard deviations of monthly returns (which, again, you cannot calculate directly from the graph – you need to know the exact returns!) are as follows: asset A: 9.1%;

Price

40 30 20 10 0 0 1 2 3 4 5 6 7 8 9 10 11 12

Asset A Asset B Asset C

asset B: 2.9%; asset C: 16.4%.

Month

A. B. C. D. E. F.

A, B, C A, C, B B, A, C B, C, A C, A, B C, B, A

Sample exam #1

QUESTION 3
Refer again to the conditions of the previous question. What is the ranking, from lowest to highest, of these assets’ geometric average monthly returns?

We know from lecture that the geometric average return summarizes the investment’s past performance. It is easy to see that during these 12 months, A performed the worst, B performed better, and C performed the best.

A. B. C. D. E. F.

A, B, C A, C, B B, A, C B, C, A C,

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