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----- ot fa @ Canadian Securities Institute Moody's Analytics Training & Certification Services Check: Section 3 Quiz Reports Overall Results Score: Number o Attempt Questions Correct Your Score 43% 1 30 13 43% You did not pass the test.
Score: 43% Chapter Results Chapter Chapter 7 — Types of Investment Products and How They Are Traded Chapter 8 — Constructing Investment Portfolios Chapter 9 — Understanding Financial Statements Questions 10 10 10 Number Correct Your Score 5 50% 3 30% 5 50%
Question Results 1. Bond quote for Trillium Corp: Coupon 5.51%; Maturity Date: June 21, 2033; Bid $100.52; Yield 5.27%. Based on this newspaper quote, which correctly identifies where the bond is currently trading? The correct answer is: A At a premium. You chose: B. At a discount. C At its face value. D At par value. Feedback: Given the yield and the coupon rate, the following relationships hold: « |[f the yield is greater than the coupon rate, the bond is trading at a discount. « If the yield is equal to the coupon rate, the bond is trading at par. « |f the yield is lower than the coupon rate, the bond is trading at a premium. Reference | Chapter 7 — Types of Investment Products and How They Are Traded 2. Which statement regarding Treasury Bills is correct? They can only be purchased between April and October each year. You chose: B. They pay interest semi-annually to treasury bill holders. C. They are issued with a three-year term and a fixed interest rate. The correct answer is: D. They are issued through a competitive bidding process at a discount from par. Feedback: Treasury bills do not pay interest. Instead, they are sold at a discount (below par) and mature at 100. The difference between the issue price and par at maturity represents the return on the investment, instead of interest. Under the Income Tax Act, this return is taxable as income, not as a capital gain. Every two weeks, Treasury bills are sold at auction by the Minister of Finance through the Bank of Canada. These bills have original terms to maturity of approximately three months, six months and one year. Reference | Chapter 7 — Types of Investment Products and How They Are Traded 3. In the municipal securities market, it is common for issuers to employ what types of bonds? Good choice! Serial bonds. Convertible bonds. Callable bonds. oo w > Zero-coupon bonds. Feedback: Today, the instrument that most municipalities use to raise capital from market sources is the instalment debenture or serial bond. Part of the bond matures in each year during the term of the bond. Reference | Chapter 7 — Types of Investment Products and How They Are Traded 4. What type of bonds are backed by an issuer’s specific assets as collateral in case of default? Callable bonds. Convertible bonds. Serial bonds. oo w > Good choice! Secured bonds. Feedback: First, corporate bonds have much more default risk than government bonds. Credit rating agencies use scales to indicate the quality of corporate bonds, with AAA (or A++) bonds having the best protection against default. Many corporate bonds include a promise to turn over an asset to the bondholders for liquidation if the corporation fails to make its coupon payments or pay the par value at maturity. These bonds are said to be secured bonds by a pledge of collateral (the asset) in the case of default (the failure to pay). Reference | Chapter 7 — Types of Investment Products and How They Are Traded
5. Carey with his retirement account invested $20,000 in each of the following Guaranteed Investment Certificates (GICs): one-year GIC at 2.05%; two-year GIC at 2.10%; three-year GIC at 2.50%; four-year GIC at 2.50% and a five-year GIC at 2.85%. His strategy is that from then on, whenever a GIC matures he will invest in a new five-year term GIC. Which type of GICs is Carey using with his retirement portfolio? Interest-linked GICs. Good choice! Laddered GICs. Instalment GICs. Index-linked GICs. oo w > Feedback: Laddered GICs: The investment is evenly divided into multiple term lengths (for example, a five-year $5,000 GIC can be divided into one-, two-, three-, four- and five-year terms of $1,000 each). As each portion matures, it can be reinvested or redeemed. This diversification of terms reduces interest rate risk. Reference | Chapter 7 — Types of Investment Products and How They Are Traded 6. Which statement correctly identifies the relationship between bonds and interest rates? Bond prices and coupon rates fluctuate daily. B. Bond yields and coupon rates fluctuate daily. The correct answer is: C. Bond yields and bond prices fluctuate daily. You chose: D. If the yield is lower than the coupon rate, the bond is trading at a discount. Feedback: While the coupon rate, along with the face value and maturity date, do not change, the price and yield of a bond fluctuates from day to day. Reference | Chapter 7 — Types of Investment Products and How They Are Traded 7. What is the approximate current yield of a 10-year bond with an annual coupon of $4.10 and a bond price of $95.75? A. 8.56%. Good choice! B. 4.28%. C. 2.14%. D. 4.1%. Feedback: We can calculate the current yield of any investment, whether it is a bond or a stock, using the following formula: Current Yield = Annual Cash Flow x100 Current Market Price In this case, the annual cash flow is the coupon paid by the bond. As previously discussed, coupons are fixed for the life of the bond so the annual cash flow is simply the total coupon paid. Note that current yield looks only at cash flows and the current market price of the investment, not at the amount that was originally invested. Reference | Chapter 7 — Types of Investment Products and How They Are Traded 8. Which graph plots interest rates against time to maturity for investors? Yield equivalence. The correct answer is: Yield curve. Yield spread premium. oo w» You chose: Yield to maturity. Feedback: The yield curve shows the relationship between interest rates and the time to maturity for a given borrower. Reference | Chapter 7 — Types of Investment Products and How They Are Traded
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Question content area top
Part 1
Calculate the 95% confidence intervals for the four different investments included in the following table.
S&P TSX
Composite
Index
S&P 500
Index
in CAD
Long-Term
Gov't of Canada
Bonds
Canadian
Treasury
Bills
Average Return (%)
10.31
11.84
7.38
5.39
Standard Deviation of Returns (%)
16.24
18.27
10.09
4.21
Question content area bottom
Part 1
The 95% confidence interval of the S&P TSX Composite Index is between
enter your response here%
and
enter your response here%.
(Round to two decimal places. Use ascending order.)
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Question 2
The following is the information for securities of ABC plc and XYZ plc:
XYZ plc
26
40
1.25
Particulars
Expected return
Standard deviation
Beta
ABC plc
25
42
0.85
The correlation coefficient between the returns of the two securities is 0.70 and
standard deviation of the market return is 20%.
Required
(a) As a new graduate accountant, CPA(T), determine if it is better to invest in
securities of ABC plc or XYZ plc
(b) If the proportional of investment in ABC plc is 40% and that in XYZ plc is 60%
determine the expected rate of return and portfolio standard deviation
(c) Determine the risk free rate
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Eaton Electronic Company's treasurer uses both the capital asset pricing model and the dividend valuation model to compute the cost
of common equity (also referred to as the required rate of return for common equity).
Assume:
Rf =
7%
Km
10%
=
1.6
D1 = $ 0.70
$ 19
8%
%3D
PO =
nt
a. Compute Ki (required rate of return on common equity based on the capital asset pricing model). (Do not round intermediate
calculations. Input your answer as a percent rounded to 2 decimal places.)
ences
Ki
b. Compute Ke (required rate of return on common equity based on the dividend valuation model). (Do not round intermediate
calculations, Input vour answer as a percent rounded to 2 decimal places.)
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« Question 36 of 50
Which of the following statements is CORRECT?
O a. Money markets are markets for long-term debt and common stocks.
O b. Money market mutual funds usually invest their money in a well-diversified portfolio of liquid common stocks.
O c. The NYSE operates as an auction market, whereas NASDAQ is an example of a dealer market.
d. While the distinctions are becoming blurred, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other partles.
O e. A liquid security is a security whose value is derived from the price of some other "underlying" asset.
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Part 1
(Capital asset pricing model) Anita, Inc. is considering the following investments. The current rate on Treasury bills is
7
percent, and the expected return for the market is
12.5
percent. Using the CAPM, what rates of return should Anita require for each individual security?
Stock
Beta
H
0.71
T
1.62
P
0.89
W
1.37
(Click
on the icon
in order to copy its contents into a
spreadsheet.)
Question content area bottom
Part 1
a. The expected rate of return for security H, which has a beta of
0.71,
is
enter your response here%.
(Round to two decimal places.)
Part 2
b. The expected rate of return for security T, which has a beta of
1.62,
is
enter your response here%.
(Round to two decimal places.)
Part 3
c. The expected rate of return for security P, which has a beta of
0.89,
is
enter your response here%.
(Round to two decimal places.)
Part 4
d. The expected rate of return for…
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Selling stock to investors for cash would result in which of the following?
Σorress
Multiple Choice
A debit to additional paid-in capital and a credit to cash
A credit to both cash and additional paid-in capital
A debit to cash and a credit to common stock
A debit to cash and a credit to the investment account
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The process of evaluating securities by
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Suppose that an entity has paid one of its liabilities twice during the year, in error The effects of this
O Assets, liabilities, and equity are understated.
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1. Ch12 Financial Planning Exercise 1
eBook
Chapter 12
Financial Planning Exercise 1
Ranking investments by expected returns
What makes for a good investment? Use the approximate yield formula or a financial calculator to rank the following investments according to their
expected returns. Round the answers to two decimal places. Do not round intermediate calculations.
a. Buy a stock for $45 a share, hold it for 3 years, then sell it for $80 a share (the stock pays annual dividends of $3 a share).
d
b. Buy a security for $20, hold it for 3 years, then sell it for $60 (current income on this security is zero). Do not round intermediate
calculations.
%
c. Buy a 1-year, 12 percent note for $940 (assume that the note has a $1,000 par value and that it will be held to maturity). Do not round
intermediate calculations.
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EXERCISES
For questions number 1 to 7, given the accounting transaction, indicate
whether the asset, liability or owner's equity has increase or decrease or
has no effect by circling the appropriate answer.
1 The owner invests personal cash in the business. (Example)
Asset
Increase
Decrease
No Effect
Liability
Increase
Decrease
No Effect
Owner's Equity
Increase
Decrease
No Effect
2 The owner withdraws cash from the business for personal use.
Asset
Increase
Decrease
No Effect
Liability
Increase
Decrease
No Effect
Owner's Equity
Increase
Decrease
No Effect
3 The company receives cash from a bank loan
Asset
Increase
Decrease
No Effect
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QUESTION 3– Risk and Return
Sintok Corporation has collected information on the following three investments. Which
investment is the most favourable based on the information presented?
Stock A
Probability
0.15
Stock B
Probability
0.25
Stock C
Probability
0.1
Return
Return
Return
2%
-3%
-5%
0.4
7%
0.5
20%
0.4
10%
0.3
10%
0.25
25%
0.3
15%
0.15
15%
0.2
30%
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Current position analysis
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Bloomberg for Education education.com/courses/258/modules/861/watch or Education Classes Continuous Learning Trading Challenge The Nature of Equities MC Market Concepts mberg L.P. and equities ds and equi... nds and e... is and e... + s and e... and e... ved. Which of the following is not true regarding the nature of equities? Equity holders are entitled to the residual cash flows from a company. 9 Equity holders' returns are influenced by the company's ability to raise prices in line with inflation. Equity holders are entitled to the same fixed repayments as bondholders. 8 7 N 65 3 Fullscreen 88 O About Us Privacy Policy Terms c
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Given the following information, what is
the standard deviation of the returns on
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Probability of State of
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Rate of Return
Вoom
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Normal
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17
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QUESTION 3 – Risk and ReturnSintok Corporation has collected information on the following three investments. Which investment is the most favourable based on the information presented?Stock A Stock B Stock CProbability Return Probability Return Probability Return0.15 2% 0.25 -3% 0.1 -5%0.4 7% 0.5 20% 0.4 10%0.3 10% 0.25 25% 0.3 15%0.15 15% 0.2 30%
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In a recent meeting, a financial advisor has advised you to invest in a reputed stock in
Muscat Securities market.
a. With reference to the selected securities explain what type of risk you will be concerned with
b. Produce a plan of diversification to mitigate and manage the risk of your portfolio of investment.
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DO NOT SOLVE QUESTION 15 it has already been answered question 15 is only required as part of the information to solve question 16. I NEED PART a) & b) FROM QUESTION 16, Thank you very much for the help
Answers of Question 15
a) Expected Rate of return = 42.50%
Standar Deviation = 127.78 %
b) A successful bankruptcy lawyer would view the stock of leaning tower of pita as a risk reducing investment
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- please dont provide annswer in image format thank you Question content area top Part 1 Calculate the 95% confidence intervals for the four different investments included in the following table. S&P TSX Composite Index S&P 500 Index in CAD Long-Term Gov't of Canada Bonds Canadian Treasury Bills Average Return (%) 10.31 11.84 7.38 5.39 Standard Deviation of Returns (%) 16.24 18.27 10.09 4.21 Question content area bottom Part 1 The 95% confidence interval of the S&P TSX Composite Index is between enter your response here% and enter your response here%. (Round to two decimal places. Use ascending order.)arrow_forwardQuestion 2 The following is the information for securities of ABC plc and XYZ plc: XYZ plc 26 40 1.25 Particulars Expected return Standard deviation Beta ABC plc 25 42 0.85 The correlation coefficient between the returns of the two securities is 0.70 and standard deviation of the market return is 20%. Required (a) As a new graduate accountant, CPA(T), determine if it is better to invest in securities of ABC plc or XYZ plc (b) If the proportional of investment in ABC plc is 40% and that in XYZ plc is 60% determine the expected rate of return and portfolio standard deviation (c) Determine the risk free ratearrow_forwardtol Processing ng Help Save & Exit Submit Saved Practice Problems i Check my work Eaton Electronic Company's treasurer uses both the capital asset pricing model and the dividend valuation model to compute the cost of common equity (also referred to as the required rate of return for common equity). Assume: Rf = 7% Km 10% = 1.6 D1 = $ 0.70 $ 19 8% %3D PO = nt a. Compute Ki (required rate of return on common equity based on the capital asset pricing model). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) ences Ki b. Compute Ke (required rate of return on common equity based on the dividend valuation model). (Do not round intermediate calculations, Input vour answer as a percent rounded to 2 decimal places.) < Prev 10 of 10 Next Mc Graw Hill 149 MacBook Airarrow_forward
- MINDTAP Q Search this course Zulaikha binti M ian 1 aining: 1:13:50 Save Submit Test for Gradi « Question 36 of 50 Which of the following statements is CORRECT? O a. Money markets are markets for long-term debt and common stocks. O b. Money market mutual funds usually invest their money in a well-diversified portfolio of liquid common stocks. O c. The NYSE operates as an auction market, whereas NASDAQ is an example of a dealer market. d. While the distinctions are becoming blurred, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other partles. O e. A liquid security is a security whose value is derived from the price of some other "underlying" asset. N W. > 低日见里 be here to searcharrow_forwardQuestion content area top Part 1 (Capital asset pricing model) Anita, Inc. is considering the following investments. The current rate on Treasury bills is 7 percent, and the expected return for the market is 12.5 percent. Using the CAPM, what rates of return should Anita require for each individual security? Stock Beta H 0.71 T 1.62 P 0.89 W 1.37 (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. The expected rate of return for security H, which has a beta of 0.71, is enter your response here%. (Round to two decimal places.) Part 2 b. The expected rate of return for security T, which has a beta of 1.62, is enter your response here%. (Round to two decimal places.) Part 3 c. The expected rate of return for security P, which has a beta of 0.89, is enter your response here%. (Round to two decimal places.) Part 4 d. The expected rate of return for…arrow_forwardNonearrow_forward
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- Opline Test Window- Google Chrome tests.mettl.com/test-window/f55ac827%#/testWindow/0/21/1 EY Accounting Assessment 0 Total 00:54:18 Finish Test Section 1 of 1 Section #1 v 15 16 17 18 19 20 21 22 24 23 25 22 of 45 All 2 43 Question # 22 Revisit Choose the best option Suppose that an entity has paid one of its liabilities twice during the year, in error The effects of this O Assets, liabilities, and equity are understated. mistake would be O Assets, net income, and equity are unaffected. O Assets and liabilities are understated. O Assets and net profit and equity are understated, and liabilities are overstated. Next Question Prev Question -91-82878-03040 Zaineh Support +1-650-924-9221 4:14 PM metti 1/16/2021arrow_forward*** 1. Ch12 Financial Planning Exercise 1 eBook Chapter 12 Financial Planning Exercise 1 Ranking investments by expected returns What makes for a good investment? Use the approximate yield formula or a financial calculator to rank the following investments according to their expected returns. Round the answers to two decimal places. Do not round intermediate calculations. a. Buy a stock for $45 a share, hold it for 3 years, then sell it for $80 a share (the stock pays annual dividends of $3 a share). d b. Buy a security for $20, hold it for 3 years, then sell it for $60 (current income on this security is zero). Do not round intermediate calculations. % c. Buy a 1-year, 12 percent note for $940 (assume that the note has a $1,000 par value and that it will be held to maturity). Do not round intermediate calculations. Grade it Now Save & Continue Continue without saving NOV 14 O Ctv A W MacBook Airarrow_forwardhelp please answer in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all workingarrow_forward
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- Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
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