FIN2601 Assignment 2 (QUIZ) Semester 2 2024

FIN2601 Assignment 2 (COMPLETE QUESTIONS & ANSWERS) Semester 2 2024 ;100 % TRUSTED workings, Expert Solved, Explanations and Solutions. For assistance call or W.h.a.t.s.a.p.p us on ...(.+.2.5.4.7.7.9.5.4.0.1.3.2)........... Question 1 Complete Mark 1.00 out of 1.00 QUIZ The financial manager of Summer Financial Group is tasked with evaluating the standard deviation of a proposed investment project. This analysis aims to provide insights into the potential risk associated with the project's expected returns, which are linked to the future performance of the economy over a specific period as follows: Economic scenario Probability of occurrence Rate of return Recession 0,1 20% Normal 0,6 13% Boom 0,3 17% What is the standard deviation of the proposed investment project? 1. 7,07% 2. 10,45% 3. 15,81% 4. 18,67% − Question 2 Complete Mark 1.00 out of 1.00 Your grandmother's portfolio is structured with 40% of her funds allocated to Transatlantic Transaction and the remaining 60% invested in Treasury Bills. This allocation strategy reflects a balance between potential returns and risk mitigation, aligning with her investment objectives and risk tolerance. The investment broker overseeing your grandmother's portfolio has furnished pertinent details to help in strategic decision-making: Portfolio Probability Possible return Transatlantic Transaction 0,6 0,3 0,1 20% 15% 30% Moderated Mediums 0,6 0,3 0,1 14% 12% 30% You are required to calculate the expected return of your grandmother's portfolio. 1. 2,96 2. 4,54% 3. 7,20% 4. 12,50% − − Question 3 Complete Mark 1.00 out of 1.00 Asher Investment Fund, a diversified investment entity, currently has a total capital of R100 000 allocated across three distinct shares. The returns on these shares vary, reflecting the different risk profiles and market positions of each investment. The fund's capital is distributed as follows: Shares Return Invested A 14,5% R60 000 B 9,2% R25 000 C 15,4% R15 000 The current risk-free rate stands at 5%, and market returns for the upcoming period have been estimated based on the following probability distribution: Probability Market return 0,25 10% 0,35 12% 0,30 13% 0,10 16% What is the beta coefficient of the investment fund? 1. 0,85 2. 1,13 3. 1,15 4. 1,30 Question 4 Complete Mark 1.00 out of 1.00 Deserved Dish, a subsidiary of Basket of Gold Events, finds itself at a pivotal juncture in its growth trajectory. With a substantial allocation of R5 million for capital expansion in the upcoming year, the management of Deserved Dish is confronted with a critical decision regarding investment strategy. Recognizing the imperative to diversify risk and maximize returns, the company aims to select from two potential investment opportunities. Probability of occurrence Rate of return Project 1 Project 2 30% 14% 8% 40% 10% 16% 30% 8% 22% You are required to calculate the expected return for these two projects. 1. Project 1 3,53% ; Project 2 5,13% 2. Project 1 10,60%; Project 2 15,40% 3. Project 1 8,20%; Project 2 8,80% 4. Project 1 2,45%; Project 2 6,89% = = = = = = = = Question 5 Complete Mark 1.00 out of 1.00 Liberty Wealth is considering the acquisition of some risky assets. This acquisition is expected to cause an increase in the portfolio's beta, reflecting a higher level of systematic risk. Additionally, there has been an increase in expected inflation, which affects the inflation premium. The initial portfolio assessment is as follows: Initial beta 1,00 Initial required return 10,20% Market risk premium 6% After the acquisition of the risky assets and changes in inflation: Percentage increase in beta 30% Increase in inflation premium 2% What is the share’s required rate of return after accounting for the increase in beta and the rise in the inflation premium? 1. 12% 2. 14% 3. 17% 4. 20% Question 6 Complete Mark 1.00 out of 1.00 A company has the opportunity to invest in one of three possible investments. The financial analysts predict the following possible outcomes for the three investments: Outcome Probability Investment C: Expected return Investment D: Expected return Investment E: Expected return Pessimistic 30% 2% 8% 6% Most likely 40% 10% 10% 8% Optimistic 30% 18% 12% 11% Calculate the range of returns for the three investments. 1. Range of outcomes: C 8%; D 2%; E 3% 2. Range of outcomes: C 20%; D 20%; E 17% 3. Range of outcomes: C 1%; D 2%; E 3% 4. Range of outcomes: C 16%; D 4%; E 5% Question 7 Complete Mark 1.00 out of 1.00 Question 8 Complete Mark 1.00 out of 1.00 Let Us Protect You is considering investing in a new project that offers various potential rates of returns. To assess the feasibility and risk associated with this investment, the company has compiled a probability distribution of returns from the project. The probability distribution of returns from the project is as follows: Probability Return 20% 15% 30% 30% 50% 40% You are required to calculate the coefficient of variation for this investment 1. 0,278 2. 0,402 3. 0,531 4. 0,806 − Athena has a bond with a current selling price of R1 123 and a par value of R1 000. The bond has a 30-year term and is currently selling at a yield of 7%. If the coupon rate is 9%, paid quarterly, how many years are left until maturity? 1. 2,45 years 2. 7,50 years 3. 8,11 years 4. 16,23 years Question 9 Complete Mark 1.00 out of 1.00 Question 10 Complete Mark 1.00 out of 1.00 If a 30-year bond with a par value of R1 000 and an annual coupon rate of 1,12% currently sells for R120,94, and assuming the yield to maturity remains constant, what would be the price of the bond five years from now?