The .......... decision is made by the investor when he either borrows or lends to attain his preference on
the CML.
The correct answer is:(C)financing
Question 2
Which transaction involves the sale of shares the investor does not own with the intention of buying
them back at a later stage at a lower price?
The correct answer is: (C)Short sales
Question 3
The .......... decision is made by an investor to be on the capital market line (CML) efficient frontier as he
initially decides to invest in the market portfolio.
The correct answer is:(C)investment
Question 4
Global Limited expects its share price to rise from R100 to R110 over the next year. The beta of Global
Limited is 1.5, the return on the market is 13% and the risk-free rate of return is 9%. Calculate the
required rate of return using CAPM and determine whether you will purchase the share.
The correct answer is:(D)15% Sell
, Question 5
An investment costs R13 530 at the beginning of the investment period, after 5 years it is worth R18 345.
Calculate the annual HPY of this investment.
The correct answer is:
(b)6.28%
Question 6
A company just paid dividends of R2.00 per share. Assume that the dividends will grow by 20% per year
during the next two years. After that, growth is expected to level off to a constant growth rate of 10%
per year. The required rate of return is 12%. Calculate the share’s intrinsic value using the two-stage
dividend growth model.
The correct answer is:
(b)R130.71
Question 7
The following are characteristics that relate to a specific stage of the industry life cycle:
To which stage do these characteristics belong?
The correct answer is:(d)Deceleration of growth and sales decline
Question 8
Bronze Limited currently retains 30% of its earnings which are R4.00 a share this year. It earns a return
on equity (ROE) of 25%. Assume a required rate of return of 12%. Determine the price-earnings ratio
(P₀/E₁) ratio and the price of Bronze Limited based on the earnings multiplier model.
The correct answer is:(d)15.56 R66.89
Question 9
In technical analysis, a .......... level is the point at which sellers take control of prices and prevent them
from rising higher.
The correct answer is:(b)resistance
Question 10
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