QUIZ QUANTITATIVE METHODS

1. A tenant pays rent of $800 monthly due on the first day of every month. If the annual
interest rate is 7 percent, the present value of a full year’s rent is closest to:

A. $9,245.
B. $9,300.
C. $9,355.

2. The preferred shares of Crane Industries are expected to pay a $10 dividend forever, starting
from the end of this year. If the required rate of return on equivalent investments is 9%, a
share of Crane Industries preferred stock should be worth:

A. $90.50.
B. $111.10.
C. $124.60.

3. A project has the following annual cash flow:

Which of the following discount rates most likely produces the highest net present value
(NPV)?
A. 6%
B. 10%
C. 15%

4. An investor purchases one share of a company for $50. Exactly one year later, the company
pays a dividend of $5.00 per share. This is followed by two more annual dividends of $6.00
and $6.50 in successive years. Upon receiving the third dividend, the investor sells the share
for $60. The money‐weighted rate of return on this investment is closest to:

A. 15%.
B. 16%.
C. 17%.

5. An investor purchases 100 shares of a company. The table below outlines the history of his
investment:

1
 Assuming that the investor does not reinvest his dividends, which are tax‐free, the
timeweighted rate of return on the investment is closest to:

A. 12.2%.
B. 13.7%.
C. 14.8%.

6. Assume that a stock’s price at the end of the next two periods is as shown below:

The probability that the stock’s prices will go down in a given period is 50%. What is the
probability that the stock’s price at the end of the second period will be the same as today
(period 0)?
A. 25%
B. 50%
C. 75%

7. George Baker, an equity fund manager has the following information about a common stock
portfolio:

From the given information, the coefficient of variation is closest to:

A. 1.32.
B. 1.24.
C. 1.18.

8. Which of the following is most likely to be true for a positively skewed distribution?

A. Mode > Median > Mean.

B. Median > Mode > Mean.
C. Mean > Median > Mode.

9. A fund manager has noted that during the past five years 60 percent of the stocks in his
portfolio have paid a cash dividend and 20 percent of the stocks have paid a stock dividend. If
65 percent of the stocks have paid a dividend of any kind, the joint probability of a stock
paying both a cash dividend and a stock dividend is closest to:

A. 10%.
B. 15%.
C. 20%.

2
10. The following information on two portfolios is given:

The expected return and the standard deviation of the portfolio are respectively closest to:
A. 12.5% and 22.3%.
B. 12% and 15.2%.
C. 13% and 16.5%.

11. Castle Hockey Club, an emerging hockey team, had a tough last season with a win to los
record of 1 to 4. In order to contest and increase its chances of winning, the team signed 3
new players and it is estimated that the chances of winning a game in the next season are
70%. Assuming that winning a single game is independent of other games, the probability
that the team will win 3 out of next 5 games is closest to:

A. 0.3087.
B. 0.3698.
C. 0.4125.

12. For a fixed income arbitrage strategy, the returns for a single trade is uniformly distributed
between 3% and 8%. If a new trade is placed today, what is the probability that the returns
will be more than 5%?

A. 0.4.
B. 0.6.
C. 0.8.

13. A sample of 25 recent orders at a restaurant showed that the mean time to serve a dish was
19 mins with a sample standard deviation of 3 mins. Assuming the population is normally
distributed, the 99% confidence interval for the population mean is:

A. 17.32 to 20.67.
B. 16.21 to 21.96.
C. 15.24 to 22.38.

14. The appropriate test statistic to test the hypothesis that the variance of a normally
distributed population is equal to 8 is the:

A. t‐test.
B. F‐test.
C. χ2 test.

15. If the significance level of a test is 0.05 and the probability of a Type II error is 0.2. What is
the power of the test?

3
 A. 0.05.
B. 0.80.
C. 0.95.
16. A researcher formulates a null hypothesis that the mean of a distribution is equal to 10. He
obtains a p‐value of 0.02. Using a 5% level of significance, the best conclusion is to:

A. reject the null hypothesis.

B. accept the null hypothesis.
C. decrease the level of significance.

17. An upward trendline is constructed by drawing a line connecting the:

A. the highs of the price chart.

B. the lows of the price chart.
C. the highest high to the lowest low of the price chart.

18. Which of the following charts does not show the high and low prices for each trading
period?

A. Bar chart.
B. Point and figure chart.
C. Candlestick chart.

19. Technical analysis most likely relies upon:

A. price and volume information.
B. fundamental analysis to confirm conclusions.
C. financial statements.

20. Which of the following statistic is most likely used for the mean of a non‐normal
distribution with unknown variance and a small sample size?
A. z‐test statistic.
B. t‐test statistic.
C. There is no test statistic for such a scenario.