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Quantitative Methods MCQ - Quantitative Methods Section 1

31 A Treasury bill with a face value of PKR 100,000 is selling for PKR 97,000. There are 140 days until maturity. Which of the following is most likely the money market yield?

32 A Treasury bill with a face value of PKR 100,000 is selling for PKR 97,000. There are 150 days until maturity. Which of the following is most likely the effective annual yield?

33 A fixed-income analyst is analyzing a T-bill which has 180 days to maturity and a bank discount yield of 2.35 percent. The effective annual yield of the bond would be closest to:

34 A T-Bill with a par value of $100,000 and 90 days to maturity has a bank discount yield of 4.70 percent. The money market yield of the instrument is closest to:

The money market yield is: 4.76%. The more intuitive method is to first calculate the HPY and then use the HPY to calculate the money market yield. To calculate the HPY, we need the discount, D: 0.047 = (D/100,000) * 360/90. D = 1,175. P = 98,825. HPY = 1,175 / 98,825 = 0.01189.

35 A Treasury bill offers a bank discount yield of 4.5 percent and has 180 days to maturity. The effective annual yield for the instrument is closest to:

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Discounting

Discounting is the reverse of compounding. It converts future cash flows into present values by applying a discount rate over the relevant number of periods.

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Question:

A portfolio has the following annual returns: 5%, 11%, -6%, 0%. The geometric mean across the four-year period is closest to:

A. 2.3%.
B. 2.5%.
C. 2.6%.

Correct answer: A

Explanation:

The geometric mean return is calculated as = [(1 + 0.05) × (1 + 0.11) × (1 − 0.06) × (1 + 0.00)]0.25 − 1 = 0.0231 ~…

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