This document contains Latest INV2601 Notes covering all Chapters • Exam SUMMARY • This document enables students gain insight into investment in financial assets; the investment environment; the risk-return framework; fundamental and technical analysis.
Examination
Duration – 2 hours
40 multiple choice questions.
Total marks = 40
Tested on study units 1 – 15 (Topic 5 study unit 16,
excluded)
Not provided: interest factor tables and formula sheet
Examination includes both theory and calculations
Mark composition:
Questions Percentage
Theory 14 35%
Calculations 26 65%
Total 40 100%
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Examination
The following questions will be tested from each topic:
Questions
CHAPTER 1: INTRODUCTION
An investment is:
a current commitment of money, based on fundamental research
to real and/or financial assets for a given period
in order to accumulate wealth over the long term
Goal of investment management
Find investment returns that satisfy the investor’s required rate of
return
Required rate of return – is the return that should compensate
the investor for:
Time value of money during the period of investment
The expected rate of inflation during the period of investment
The risk involved
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Required Rate of Return
To determine the required rate of return:
The investor has to determine the nominal risk free rate
of return
Then add risk premium to compensate for the risk
associated with the investment
NRFR =[(1 + RRFR)(1 + EI)]
Where: RRFR = real rate of return (in decimal form)
EI = expected inflation (in decimal form)
RRFR = (1 + NRFR) – 1
(1 + EI)
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