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Practice Test Solutions[1]

# Practice Test Solutions[1]

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05/09/2014

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1
Probability
A
A_Avg(A)
A_Avg(A)^2*Prob
B
B - Avg(B)
0.3
10
1.4
0.59
18
9.6
0.4
5
-3.6
5.18
3
3
0.3
12
3.4
3.47
6
6
Avg return
8.6
8.4
Standard deviation
3.04
2
Probability
A
B
10
18
5
3
12
6
Avg return
9
9
Standard deviation
2.94
6.48
3
X^2
Y^2
XY
5
9
25
81
45
8
3
64
9
24
12
6
144
36
72
14
10
196
100
140
16
2
256
4
32
10
4
100
16
40
-5
7
25
49
-35
-7
8
49
64
-56
22
9
484
81
198
-3
12
9
144
-36
Total
72
70
1352
584
424
N
10
Beta
n*Sum(XY)
4240
Sum (X) * Sum (Y)
5040
Difference - A
-800
n*Sum(X^2)
13520
Sum(X)^2
5184
Difference - B
8336
Square root
91.3
n*Sum(Y^2)
5840
Sum(Y)^2
4900
Difference - C
940
Square root
30.66
Beta = A / B
-0.096
-0.096
R Squared
0.08
Index return
(X)
Scrip return
(Y)
Co-eff of correlation
-0.29
-0.29
Alpha
7.69
Punithavathy Pandian
8Probability
Price
Price - Avg Pric
e
Price - Avg price ^2 * Prob
0.1
60
-10
10
0.2
65
-5
5
0.4
70
0
0
0.2
75
5
5
0.1
80
10
10
Expected return
70
Standard deviation
5.48
9
A
B
C
Beta
0.8
-0.21
1.2
Standard deviation
4.39
1.93
5.39
Correlation
0.54
-0.33
0.8
R squared
0.29
0.11
0.63
Given low R squared for A and B, Beta is not reliable; even for C, it is not very healthy
Going by SD, one would choose B assuming returns are the same
Returns
10
NSE (X)
A
B
NSE (X)
A
857.07
24
50.28 -
-
862.46
25
48.88
0.01
0.04
858.89
23.63
47.75
0.00
-0.05
861.33
23.63
48.88
0.00
0.00
853.78
25
51.38
-0.01
0.06
872.02
26.75
48.5
0.02
0.07
859.68
27.25
55.38
-0.01
0.02
871.91
26
54.38
0.01
-0.05
878.53
26.7
55.28
0.01
0.03
807.23
27.7
41.38
-0.08
0.04
877.72
25.6
48.3
0.09
-0.08
893.82
24.5
49.5
0.02
-0.04
Total
0.0498
0.0333
N
11
Beta
A
B
n*Sum(XY)
-0.11
0.35
Sum (X) * Sum (Y)
0
0
Difference - A
-0.11
0.35
n*Sum(X^2)
0.17
0.17
Sum(X)^2
0
0
Difference - B
0.17
0.17
Beta = A / B
-0.64
2.04
Higher returns
B
12
A
B
C
D
Market
Alpha
0.1
0.07
0.08
0.05
Beta
1.19
-0.8
0.9
-0.88
1
Correlation
1
-0.7
1
-0.72
1
Standard deviation
0.43
0.43
0.19
0.36
Average return
0.27
-0.05
0.21
-0.08
0.15
R squared
1
0.49
1
0.52
Average returns are high
Beta is reliable given R squared
16
Absolute #s
%
1500
0.1
6000
0.4
Average return
3750
0.25
SD
2250
0.15
17
X
Y
0.42
0.27
0.34
0.23
Average return
0.38
0.25
SD
0.04
0.02