Quantitative Methods

Based on the advice of his financial advisor regarding dollar cost averaging, a client invests $2,000 each month into a blue-chip stock. The stock price on the date of purchase each month over a four-month stretch was $12, $14, $11, and $9. Using the harmonic mean, the average cost per share of the stock is closest to:

$11.20.

If an investment loses 3% of its value over 120 days, its annualized return is closest to:

-9.0%.

An investor buys one share of stock for $100. At the end of year one she buys three more shares at $89 per share. At the end of year two she sells all four shares for $98 each. The stock paid a dividend of $1.00 per share at the end of year one and year two. What is the investor's time-weighted rate of return?

0.06%.

An investor buys a share of stock for $200.00 at time t = 0. At time t = 1, the investor buys an additional share for $225.00. At time t = 2 the investor sells both shares for $235.00. During both years, the stock paid a per share dividend of $5.00. What are the approximate time-weighted and money-weighted returns respectively?

10.8%; 9.4%.

If a stock's initial price is $20 and its price increases to $23, its continuously compounded rate of return is closest to:

13.98%.

An investor buys a share of stock for $40 at time t = 0, buys another share of the same stock for $50 at t = 1, and sells both shares for $60 each at t = 2. The stock paid a dividend of $1 per share at t = 1 and at t = 2. The periodic money-weighted rate of return on the investment is closest to:

23.8%.

An investor buys a share of stock for $40 at time t = 0, buys another share of the same stock for $50 at t = 1, and sells both shares for $60 each at t = 2. The stock paid a dividend of $1 per share at t = 1 and at t = 2. The time-weighted rate of return on the investment for the period is closest to:

24.7%.

The harmonic mean of 3, 4, 5 is

3.83

Assume an investor makes the following investments: Today, she purchases a share of stock in Redwood Alternatives for $50.00. After one year, she purchases an additional share for $75.00. After one more year, she sells both shares for $100.00 each. There are no transaction costs or taxes. The investor's required return is 35.0%. During year one, the stock paid a $5.00 per share dividend. In year two, the stock paid a $7.50 per share dividend. The time-weighted return is:

51.4%.

XYZ Corp. annual stock returns 22% 5% -7% 11% 2% 11% The mean annual return on XYZ stock is most appropriately calculated using the:

Geometric mean

An interest rate from which the inflation premium has been subtracted is known as a:

Real interest rate

An investor buys a non-dividend paying stock for $100 at the beginning of the year with 50% initial margin. At the end of the year, the stock price is $95. Deflation of 2% occurred during the year. Which of the following return measures for this investment will be greatest?

Real return.

An interest rate is best interpreted as a

Required rate of return of the opportunity cost of consumption

Selmer Jones has just inherited some money and wants to set some of it aside for a vacation in Hawaii one year from today. His bank will pay him 5% interest on any funds he deposits. In order to determine how much of the money must be set aside and held for the trip, he should use the 5% as a:

discount rate.

A dataset contains six values, none of which are equal. The arithmetic mean of the data is 13.25, and the geometric mean of the data is 12.75. The harmonic mean will be:

less than 12.75.

Given a holding period return of R, the continuously compounded rate of return is:

ln(1 + R).

The value of an investment increases 5% before commissions and fees. This 5% increase represents:

neither the investment's gross return nor its net return.

Wei Zhang has funds on deposit with Iron Range bank. The funds are currently earning 6% interest. If he withdraws $15,000 to purchase an automobile, the 6% interest rate can be best thought of as a(n):

opportunity cost.

The most appropriate measure of the increase in the purchasing power of a portfolio's value over a given span of time is a(n):

real return.