100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
CFA SALT TEST SOLUTIONS (100% Accurate) $9.99   Add to cart

Exam (elaborations)

CFA SALT TEST SOLUTIONS (100% Accurate)

 5 views  0 purchase
  • Course
  • CFA - Chartered Financial Analyst
  • Institution
  • CFA - Chartered Financial Analyst

CFA SALT TEST SOLUTIONS (100% Accurate) CFA SALT TEST SOLUTIONS (100% Accurate) A company is able to borrow over 5 years at a 5.7% interest rate. If the nominal risk-free rate is 4% and lenders require premiums of 1% for inflation, 0.8% for liquidity, and 0.4% for maturity, the compensation for...

[Show more]

Preview 2 out of 10  pages

  • October 17, 2024
  • 10
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
  • winsorized mean
  • CFA - Chartered Financial Analyst
  • CFA - Chartered Financial Analyst
avatar-seller
conceptialresearchers
CFA SALT TEST SOLUTIONS (100%
Accurate)




Conceptial Research 2024 conceptialresearch@gmail.com

, CFA SALT TEST SOLUTIONS (100%
Accurate)
A company is able to borrow over 5 years at a 5.7% interest rate. If the nominal risk-
free rate is 4% and lenders require premiums of 1% for inflation, 0.8% for liquidity,
and 0.4% for maturity, the compensation for the possibility that the company does
not repay the loan is closest to: - ANSWER - Remember r = rf + I + D + L + M

Nominal risk free rate = rf + I = 4%.
I = 1%
L = 0.8%
M= 0.4%

So 5.7 = 4 + D + 0.8 + 0.4, so D = 0.5%

Sources of return for financial assets - ANSWER - 1. Asset price fluctuations -->
capital gains and losses (e.g., non-dividend paying stocks)
OR
2. periodic income --> e.g., from cash dividends or interest payments

Holding period return (HPR) - ANSWER - return earned on an asset for a single
period of time (1 day, 1 year, etc)

R = (P1 - P0 + I)/P0) = capital gain + dividend yield

P0 = purchase price at time 0
P1 = purchase price at time 1
I = income earned over the holding period

HPR for periods of more than 1 year:

R = [(1 + R1) x (1 + R2) x ... x (1 + Rx)] - 1

3 years ago, an investor paid $10,000 to establish a position in a non-dividend-
paying stock. During this time, the stock's annual returns have been 8%, 3%, and -
5%, respectively.

Calculate the investor's holding period return and the position's terminal value. -
ANSWER - R = (1 + 0.08) x (1 + 0.03) x (1 + -0.05) - 1 = 0.0568

R = 5.68%
Terminal value = 1.0568 x 10,000 = 10,568

Arithmetic/Mean return - ANSWER - average

This method does not account for compounding
Only good for measuring average returns over a one-year horizon

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller conceptialresearchers. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for $9.99. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

83750 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling
$9.99
  • (0)
  Add to cart