1 The nominal interest rate exceeds the effective annual rate where there is only 1 compounding period per annum.

True

False

2 When comparing investments, a high discount rate tends to favour the investment with large cash flows early.

True

False

3 A public company CEO, in accordance with regulatory requirements, is required to main share ownership in the company of at least 5% of the issued ordinary shares.

True

False

4 The rate of growth in an account balance over time, at a given compound interest rate is linear.

True

False

5 Zero coupon bonds sell well above their par value because they offer no coupons.

True

False

6 Complete diversification means that the portfolio is no longer subject to market risk.

True

False

7 Jane Austin has an investment in gold ingots that she is confident will be worth $12 exactly 1 year from today. At present they are valued at $11.

Required:

In order for Jane to generate a 20% return over the next year, the gold ingots would need to fall in value by $1 today.

True

False

8 The expected return of the market portfolio is equal to the market risk premium.

True

False

9 If the expected return of a bet, which is based on a coin toss, is $15, then that means that the outcome of the bet will be a $15 cash inflow to the person making the bet.

True

False

10 If investors believe inflation will be increasing in the future, the prevailing yield will be downward sloping.

True

False