INV3701 OCTOBER/
NOVEMBER EXAM
MEMO
Page 2 of 22 INV3701
MAY/JUNE 2022
TURN OVER
SECTION A – SHORT QUESTIONS (10 MARKS)
This section consists of five questions that are worth two marks each.
Circle the correct answer for each multiple-choice question (Questions 1 to 4) and answer
Que...
SECTION A – SHORT QUESTIONS (10 MARKS)
This section consists of five questions that are worth two marks each.
Circle the correct answer for each multiple-choice question (Questions 1 to 4) and answer
Question 5 in the space provided.
1. Which source of perceived mispricing does the active investment management attempt to identify?
1. The difference between intrinsic value and market price.
2. The difference between estimated intrinsic value and market price.
3. The difference between estimated intrinsic value and market price.
4. The difference between intrinsic value and estimated intrinsic value.
An active investment manager attempts to capture positive alpha (risk adjusted return). A perceived
mispricing is the difference between estimated intrinsic value and the market price of an asset.
2. Which statement is correct regarding an asset's value?
1. An asset's value is the present value of the sum of its past cash flows.
2. An asset's value is the present value of the sum of its future cash flows.
3. An asset's value is the present value of the sum of its past and future cash flows.
4. An asset's value is the future value of the sum of its past and future cash flows.
An asset's value is the present value of the sum of its future cash flows.
3. If you prefer to use the P/E ratio rather than the P/S ratio, which statement will best support your
preference?
1. Earnings are more stable than sales.
2. Earnings are a chief driver of investment value.
3. Earnings are not as easily manipulated as sales.
4. Earnings are positive even when the sales are negative.
TURN OVER
, Page 2 of 22 INV3701
MAY/JUNE 2020
SECTION A – SHORT QUESTIONS (10 MARKS)
This section consists of five questions that are worth two marks each.
Circle the correct answer for each multiple-choice question (Questions 1 to 4) and answer
Question 5 in the space provided.
1. Which source of perceived mispricing does the active investment management attempt to identify?
1. The difference between intrinsic value and market price.
2. The difference between estimated intrinsic value and market price.
3. The difference between estimated intrinsic value and market price.
4. The difference between intrinsic value and estimated intrinsic value.
An active investment manager attempts to capture positive alpha (risk adjusted return). A perceived
mispricing is the difference between estimated intrinsic value and the market price of an asset.
2. Which statement is correct regarding an asset's value?
1. An asset's value is the present value of the sum of its past cash flows.
2. An asset's value is the present value of the sum of its future cash flows.
3. An asset's value is the present value of the sum of its past and future cash flows.
4. An asset's value is the future value of the sum of its past and future cash flows.
An asset's value is the present value of the sum of its future cash flows.
3. If you prefer to use the P/E ratio rather than the P/S ratio, which statement will best support your
preference?
1. Earnings are more stable than sales.
2. Earnings are a chief driver of investment value.
3. Earnings are not as easily manipulated as sales.
4. Earnings are positive even when the sales are negative.
TURN OVER
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