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Question 1 of 10
1. Question
Which of the following form(s) the important foundation for understanding applied financial methods and formulae?
I. Statistics
II. Statistical concepts
III. Statistical calculations
IV. Statistical algorithmsCorrect
Statistical concepts and calculations form an important foundation for understanding applied financial methods and formulae.
Incorrect
Statistical concepts and calculations form an important foundation for understanding applied financial methods and formulae.
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Question 2 of 10
2. Question
Investment advisors and consultants should have a firm grasp on quantitative concepts in order to do which of the following?
I. Analyze historical data
II. Calculate and analyze investment risk and returns
III. Draw accurate conclusions
IV. Make appropriate recommendations to clientsCorrect
Investment advisors and consultants should have a firm grasp on quantitative concepts in order to analyze historical data, calculate and analyze investment risk and returns, draw accurate conclusions, and make appropriate recommendations to clients.
Incorrect
Investment advisors and consultants should have a firm grasp on quantitative concepts in order to analyze historical data, calculate and analyze investment risk and returns, draw accurate conclusions, and make appropriate recommendations to clients.
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Question 3 of 10
3. Question
Which of the following concepts should come easily to investment advisors and consultants?
I. Compounding
II. Discount factors
III. Averages
IV. Measures of dispersionCorrect
Concepts like compounding, discount factors, averages, measures of dispersion, and confidence intervals should come easily to investment advisors and consultants.
Incorrect
Concepts like compounding, discount factors, averages, measures of dispersion, and confidence intervals should come easily to investment advisors and consultants.
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Question 4 of 10
4. Question
If you purchase a share of XYZ Corporation for $100 and the most you can lose is$100; this is known as?
I. Complete liability
II. Limited liability
III. Maximum liability
IV. Compound liabilityCorrect
One useful feature of log returns relates to limited liability. For For many financial assets, including equities and bonds, the most that you can lose is the amount that you’ve put into them. For example, if you purchase a share of XYZ Corporation for $100, the most you can lose is that $100. This is known as limited liability.
Incorrect
One useful feature of log returns relates to limited liability. For For many financial assets, including equities and bonds, the most that you can lose is the amount that you’ve put into them. For example, if you purchase a share of XYZ Corporation for $100, the most you can lose is that $100. This is known as limited liability.
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Question 5 of 10
5. Question
When it comes to mathematical and computer models in finance, it is often much easier to work with variables that are unbounded which means?
I. Variables that can range from negative limit to positive infinity.
II. Variables that can range from zero rated to 100 percent rated.
III. Variables that can range from 0 percent to 100 percent.
IV. Variables that can range from negative infinity to positive infinity.Correct
when it comes to mathematical and computer models in finance, it is often much easier to work with variables that are unbounded, that is, variables that can range from negative infinity to positive infinity.
Incorrect
when it comes to mathematical and computer models in finance, it is often much easier to work with variables that are unbounded, that is, variables that can range from negative infinity to positive infinity.
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Question 6 of 10
6. Question
Which of the following is(are)features of log returns?
I. They relate to log prices.
II. They have compounding returns.
III. They relate to limited liability.
IV. They have infinite length.Correct
Log returns might seem more complex than simple returns, but they have a number of advantages over simple returns in financial applications.
Some of the features include:
-Log prices
-compounding returns
-limited liabilityIncorrect
Log returns might seem more complex than simple returns, but they have a number of advantages over simple returns in financial applications.
Some of the features include:
-Log prices
-compounding returns
-limited liability -
Question 7 of 10
7. Question
A perpetuity is a security that pays a fixed coupon for eternity. Determine the present value of a perpetuity, which pays a $5 coupon annually. Assume a constant 4 percent discount rate.
I. $120
II. $125
III. $120.25
IV. $130Correct
V =∞Σi=1$5/(1.04)i
V = $5∞Σi=1
( 1/1.04)i = $5∞Σi=1 0.96i = $5 0.96/1 − 0.96
= $5 ⋅ 25V = $125
Incorrect
V =∞Σi=1$5/(1.04)i
V = $5∞Σi=1
( 1/1.04)i = $5∞Σi=1 0.96i = $5 0.96/1 − 0.96
= $5 ⋅ 25V = $125
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Question 8 of 10
8. Question
In many financial scenarios—including perpetuities and discount models for stocks and real estate—it is often convenient to treat an extremely long series of payments as if it were?
I. Zero
II. Finite
III. Infinite
IV. DefinitiveCorrect
In many financial scenarios—including perpetuities and discount models for stocks and real estate—it is often convenient to treat an extremely long series of payments as if it were infinite.
Incorrect
In many financial scenarios—including perpetuities and discount models for stocks and real estate—it is often convenient to treat an extremely long series of payments as if it were infinite.
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Question 9 of 10
9. Question
In many financial scenarios—including which of the following is often convenient to treat the extremely long series of payments as if it were infinite?
I. discount models for real estate
II. discount models for stocks
III. perpetuities
IV. perpetuities for the economyCorrect
In many financial scenarios—including perpetuities and discount models for stocks and real estate—it is often convenient to treat an extremely long series of payments as if it were infinite
Incorrect
In many financial scenarios—including perpetuities and discount models for stocks and real estate—it is often convenient to treat an extremely long series of payments as if it were infinite
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Question 10 of 10
10. Question
What is the present value of receiving $12 cashflow every year, forever, starting today with a constant 7% discount rate, and no risk of default?
I. $187.75
II. $183.43
III. $180.46
IV. $180.25Correct
PV = 12+12/0.07= $183.43
Incorrect
PV = 12+12/0.07= $183.43