Question 237 MCQ · 1.0 marks
Asset A
Asset B
Robert is indifferent between the two assets
Information is not sufficient.
A published solution is not available for this question yet.
Corporate Finance · Quiz 2 · Sep 2024
Corporate Finance · Quiz 2 · Sep 2024
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Question 238 MCQ · 1.0 marks
What would be the fair price of a bet that pays 2 with a 25% probability, pays 4 with a 50%
probability and pays 8 with a 25% probability?
4
4.5
5
5.5
A published solution is not available for this question yet.
Question 239 MCQ · 1.0 marks
Suppose a 1-year government bond is offering a 10% rate of return. Ankit has Rs 10,000, which he
can invest in government bonds or lend to his friend Suresh. He believes that Suresh will pay back
the promised amount with an 80% probability and will pay back nothing with a 20% probability.
What is the default premium that Ankit should ask from Suresh?
37.50%
27.50%
17.50%
10.00%
A published solution is not available for this question yet.
Question 240 MCQ · 1.0 marks
Axis Bank has assets of 1000 units, liabilities of 750 units and capital of 250 units. What is the
leverage ratio for Axis Bank?
4
3
0.33
0.25
A published solution is not available for this question yet.
Question 241 MCQ · 1.0 marks
There are two assets: a risk-free asset that offers a 5% rate of return and a risky asset that has an
expected rate of return of 15% and a standard deviation of 10%. What is the slope of the budget
line of a portfolio consisting of these two assets?
1.5
1
-1
-1.5
A published solution is not available for this question yet.
Question 242 MCQ · 1.0 marks
An asset A has a correlation of 0.2 with the market and a standard deviation of 20%. If the market
return has a standard deviation of 5%, what is the beta of asset A?
-0.2
0.2
0.8
3.2
A published solution is not available for this question yet.
Question 243 MCQ · 1.0 marks
Short selling refers to
Buying stock at a low price and selling them at a higher price.
Selling stocks you own for immediate profit.
Selling stocks, you don’t own in the hope of buying them back at a lower price.
Selling the stocks which are trading at minimum price.
A published solution is not available for this question yet.
Question 244 MCQ · 1.0 marks
You create a portfolio of 16 identical assets that have an expected return of 20% and a standard
deviation of 20%. These 16 assets are uncorrelated with each other. What is the standard deviation
of your portfolio?
20%
10%
5%
1.25%
A published solution is not available for this question yet.
Question 245 MCQ · 1.0 marks
Which of the following statements is **incorrect**?
The minimum variance set is a subset of the feasible set.
The minimum variance set is the left boundary of a feasible set.
Risk-averse investors always choose the global minimum variance portfolio as
their optimal portfolio.
The efficient frontier is a subset of the minimum variance set.
A published solution is not available for this question yet.
Question 246 MCQ · 1.0 marks
If the utility function of an individual is a strictly concave function, the individual is
Risk neutral
Risk averse
Risk lover
He does not care about the risk.
A published solution is not available for this question yet.
Question 247 MCQ · 1.0 marks
A borrower is called solvent if
His capital exceeds his assets.
His liabilities exceed his assets.
His assets exceed his liabilities.
His liabilities exceed his capital.
A published solution is not available for this question yet.
Question 248 MCQ · 1.0 marks
A garment outlet can be worth 60 thousand in two years with a 25% probability or 150 thousand in
two years with a 75% probability, depending on product demand. The appropriate cost of capital is
10% per year. What is the present value of the outlet? (up to two decimal points)
100.00 thousand
105.37 thousand
115.91 thousand
127.50 thousand
A published solution is not available for this question yet.
Question 249 MCQ · 1.0 marks
Which of the following statements is correct?
Equity owners are paid off first, and then, the debt is paid off.
Equity owner bears less risk in comparison to debt creditors.
Equity ownership is an example of limited liability.
Equity financing does not provide ownership rights.
A published solution is not available for this question yet.
Question 250 MCQ · 1.0 marks
At the optimal consumption point
The slope of the budget line is more than the marginal rate of substitution.
The consumer does not consume his whole income.
The budget line is tangent to the indifference curve.
The marginal utility of the goods is the same.
A published solution is not available for this question yet.
Question 251 MCQ · 1.0 marks
6%
12%
18%
24%
A published solution is not available for this question yet.
Question 252 MCQ · 1.0 marks
0.048
0.078
0.120
0.250
A published solution is not available for this question yet.
Question 253 MCQ · 1.0 marks
You purchase a farm located near a river for 100 thousand units. You believe that there is a 20%
chance of flooding in the river in the next year. If there is a flood, the produce in the farm gets
destroyed, and the total payoff is 40 thousand units in the next year; otherwise, the farm
generates a payoff of 150 thousand units in the next year. The appropriate cost of capital is 20%
per year. Suppose you finance your purchase with a loan of 80 thousand units and the remaining
amount as equity.
Based on the above data, answer the given subquestions.
What would be the appropriate promised rate of return that the creditor of the loan would
demand?
20%
27.5%
32.5%
37.5%
A published solution is not available for this question yet.
Question 254 MCQ · 1.0 marks
You purchase a farm located near a river for 100 thousand units. You believe that there is a 20%
chance of flooding in the river in the next year. If there is a flood, the produce in the farm gets
destroyed, and the total payoff is 40 thousand units in the next year; otherwise, the farm
generates a payoff of 150 thousand units in the next year. The appropriate cost of capital is 20%
per year. Suppose you finance your purchase with a loan of 80 thousand units and the remaining
amount as equity.
Based on the above data, answer the given subquestions.
What is the expected payoff for the equity owner in the next year?
20 thousand
25 thousand
32 thousand
40 thousand
A published solution is not available for this question yet.
Question 255 MCQ · 1.0 marks
Based on the above data, answer the given subquestions.
What is Monica’s expected utility?
740
27.2
26.0
14.0
A published solution is not available for this question yet.
Question 256 MCQ · 1.0 marks
Based on the above data, answer the given subquestions.
If Monica pays p for an insurance policy that would pay her 800 units if she suffered a severe
injury, then she would be sure to have an income of 900-p regardless of whether she is injured.
What would be the largest price that Monica would be willing to pay for such insurance?
16 units
100 units
160 units
224 units
A published solution is not available for this question yet.
Question 257 MCQ · 1.0 marks
Based on the above data, answer the given subquestions.
A portfolio is formed with 40% of wealth invested in Asset 1 and 60% of wealth invested in Asset 2.
What would be the expected rate of return of the portfolio?
0.12
0.14
0.16
0.18
A published solution is not available for this question yet.
Question 258 MCQ · 1.0 marks
Based on the above data, answer the given subquestions.
What would be the standard deviation of the rate of return of the portfolio?
0.20
0.22
0.24
0.27
A published solution is not available for this question yet.
Question 259 MCQ · 1.0 marks
Based on the above data, answer the given subquestions.
Suppose you would like to construct a portfolio with an expected rate of return of 15%. What
weights would you put on Asset 1 and Asset 2, respectively?
40%, 60%
50%, 50%
60%, 40%
70%, 30%
A published solution is not available for this question yet.
Question 260 MCQ · 1.0 marks
Based on the above data, answer the given subquestions.
What are the weights of Asset 1 and Asset 2 in the minimum variance portfolio?
77.78%, 22.22%
22.22%, 77.78%
55.56%, 44.44%
44.44%, 55.56%
A published solution is not available for this question yet.
Question 261 MCQ · 1.0 marks
Based on the above data, answer the given subquestions.
What is the expected rate of return of the minimum variance portfolio?
12.22%
14.44%
15.56%
17.78%
**Design Thinking**
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