Final PN-14 SFM Quiz 8

1. Portfolio return = 13%, risk-free = 6%, β = 1.1.

Treynor Ratio = ?

2. σA = 10%, σB = 20%, ρ = –1. Weight of A for zero-risk = ?

3. Rf = 5%, β = 1.2, Rm = 14%. Find expected return.

4. Portfolio return = 14%, risk-free = 6%, portfolio σ = 12%.

Sharpe Ratio = ?

5. A (ER = 10%, w = 0.4), B (ER = 12%, w = 0.6). Portfolio ER = ?

6. A (σ = 20%, weight = 0.6), B (σ = 10%, weight = 0.4), correlation= 0.5.

Find portfolio σ.

7. Security A: σ = 12%, Weight = 0.5 Security B: σ = 8%, Weight = 0.5 Correlation = 0.

Portfolio Risk = ?

8. An investor allocates 70% of wealth in Security A (Expected Return = 15%) and 30% in Security B (Expected Return = 9%). What is the expected portfolio return?

9. An investor has the following two-security portfolio:

Security A:

Expected Return = 12% Standard Deviation = 18%

Security B:

Expected Return = 8% Standard Deviation = 10%

The correlation coefficient between A and B is 0.30.

The investor invests Rs.60,000 in Security A and Rs.40,000 in Security B.

What will be the expected return and standard deviation (risk) of the portfolio?

10. The probability distribution of security N is given below: Probability Return

0.167             60

0.333             30

0.500             20

The risk (standard deviation) of the return of the security is approximately:

11. A company enters into an interest rate swap with a notional principal of $2 million. Under the swap: The company pays a fixed rate of 7% per annum The company receives a floating rate equal to LIBOR of 6% per annum What is the net cash flow for the company for the year?

12. Hedging using derivatives aims to:

13. The initial margin is required in:

14. Which of the following is true about options?

15. Which of the following is not a derivative instrument?

16. Mr. Umapada can earn a return of 25% by investing in equity shares on his own. He is now considering a recently announced equity-based mutual fund scheme in which:

Initial expenses: 8.22%

Annual recurring expenses: 2.1%

How much must the mutual fund earn before expenses to provide Mr. Umapada with a net return of 25%?

17. TVD Plan, a hedge fund, currently has assets of Rs.20 crore. CMA Vivek, the manager of the fund, charges: A management fee of 0.10% of portfolio assets, and An incentive fee of 2%, linked to the gross return each year in excess of the portfolio’s maximum value since inception. The maximum value the fund has achieved since inception was Rs.21 crore. If the fund earns a return of 8% during the year, compute the total fee payable to CMA Vivek.

18. A mutual fund had a Net Asset Value (NAV) of Rs.25 at the beginning of a month. During the month, it distributed an income of Rs.0.0456 per share and a capital gain of Rs.0.04 per share. At the end of the month, the NAV was Rs.25.05. What is the monthly return of the fund?

19. The following information is available for a mutual fund scheme:

Portfolio Return (Rp) = 22%

Risk (Standard Deviation, σ) = 25% Beta (β) = 0.80

Risk-free Rate (Rf) = 19%

What is the Treynor’s Ratio of the mutual fund?

20. A certain mutual fund scheme has the following details:

Portfolio return = 25%

Standard deviation = 4.2%

Sharpe Ratio = 5

What is the risk-free rate of return?

21. The following information is extracted from HDDD Mutual Fund Scheme:

NAV on 01-11-2024 = Rs.88.25

Annualized return = 25%

Distributions of income and capital gains during the month = Rs.0.40 and Rs.0.20 per unit respectively

What will be the NAV on 30-11-2024?

22. When two alternative proposals are such that the acceptance of one automatically excludes the possibility of accepting the other, the decision-making is referred to as:

23. Depreciation is included as a cost in which of the following capital budgeting techniques?

24. A company wishes to earn a real rate of return of 18% from its project, while the inflation rate is 9%. The normal (nominal) rate of return the company should target is:

25. A project has an expected Net Present Value (NPV) of Rs.2,30,000 and a standard deviation of Rs.69,000.

Calculate the Coefficient of Variation (CV) of the project.