Professional Documents
Culture Documents
Revision 1
Revision 1
Question 1
• If you want to buy a new boat in 4 years time,
and know it will cost $12,500, how much do
you need to invest today at 5% p.a to buy the
boat in 4 years time?
Answer
• PV = 12500/ (1+0.05) 4
• = $10,283.78
Question 2
• If you invest $3,500 for 8 years at 2.5% p.a
compounded quarterly, how much will you
have at the end?
• What is the EAR?
Answer
• FV = 3500(1+0.025)^32
4
• = $4,272.25
• = 55 / 7 = 7.86%
Question 9
• What is the SD of the previous question’s
returns?
• i.e 3%, 15%, 6%, 11%, 16%, -5%, 9%
Answer
• Mean 7.86
• (3 - 7.86)^2 + (15 – 7.86)^2 + (6 – 7.86)^2 +
(11 – 7.86)^2 + (16 – 7.86)^2 + (-5% - 7.86)^2
+ (9 – 7.86)^2 / 7-1
• 23.62 + 50.97 + 3.46 + 9.86 + 66.26 + 165.38 +
1.29 = 320.84 / 6 = 53.47
• Square root 53.47
• SD = 7.31%
Question 10
• What is the coefficient of variation for the
previous question?
Answer
• CV = SD/ r
• 13.9%
RATIOS
• Study the ratios so that you know how to use
them to compare between companies. Read
through the slides and other sources for
revision.