INV2601 ASSESSSMENT 1 SEMESTER 1OF 2024 EXPECTED QUESTIONS AND ANSWERS
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Course
INV2601 - Investments: An Introduction (INV2601)
Institution
University Of South Africa (Unisa)
THIS DOCUMENT CONTAINS INV2601 ASSESSSMENT 1 SEMESTER 1 OF 2024 EXPECTED QUESTIONS AND ANSWERS. CORRECT USE AS A GUIDE CAN HELP YOU SCORE ABOVE 85% IN THE ASSESSMENT
Started on Wednesday, 13 March 2024, 5:03 PM
State Finished
Completed on Wednesday, 13 March 2024, 6:24 PM
Time taken 1 hour 20 mins
Question 1
On January 1, you bought 500 shares at R65 and a year later sold them for R68 a share. During the year, you received a dividend of R2 per share. Assuming the
Complete rate of inflation is 5%. Calculate the real rate of return on this investment.
Marked out of
1.00
Flag
question a. 2.56%
b. 3.08%
c. 4.62%
d. 7.69%
Question 2
Use the table below to calculate the coefficient of variation.
Complete
Marked out of
State of the economy Probability of occurrence (%) Rate of return
1.00
Boom 20 8
Flag
question Normal 30 10
Recession 50 12
a. 0.1474
b. 0.2302
c. 0.6402
d.
6.7862
Question 3
If you place a stop-loss order to sell 500 shares of Nedbank at R130 when the current price is R135, how much will you receive for each share if the price
Complete drops to R127?
Marked out of
1.00
Flag
question a. Close to R127
b. Close to R130
c. Close to R135
d. Won’t sell because the price is too low
Question 4
Mondi Ltd has a current price of R20 per share, an expected growth rate of 9%, and an expected dividend in the next year of R1.00. Given its risk, you have a
Complete required rate of return for the share of 17%. Determine the expected rate of return and the investment decision you would make.
Marked out of
1.00
Flag
question a. 5% Buy
b. 5% Sell
c. 14% Buy
d. 14% Sell
Question 5
Which investment do these characteristics belong to?
Complete
a. It is illiquid and thus may not be able to be redeemed at any time.
Marked out of
1.00 b. There is usually a lock-in period to prevent aborting any strategy.
Flag c. There is a private pool of investment capital that is limited to the partners.
question
d. It is managed by a general partner who earns fees based only on investors’ profits, not losses.
a. Unit trusts
b.
Hedge funds
, c. Investment trusts
d.
Participation bonds schemes
Question 6
The efficient frontier represents a combination of which of the following?
Complete
a. Only portfolios
Marked out of
1.00 b. A portfolio of risky assets
Flag c. A set of portfolios with a maximum expected rate of return to a given risk
question
d. Single assets
a. a, b, d
b. a, b, c
c. d, b, c
d. a, b, c and d
Question 7
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
Complete expected to level off to a constant growth rate of 10% per year. The required rate of return is 12%. What is the share’s intrinsic value using the two-stage
Marked out of dividend growth model?
1.00
Flag
question
a. R100.89
b. R158.40
c. 130.71
d. R126.44
Question 8
Assume the South African economy is experiencing a decline in its economic growth, an increase in inflation, and a decrease in consumption. The South
Complete
African Reserve Bank (SARB) intends to rectify the country’s current economic situation. It would implement the monetary policy tools by …
Marked out of
1.00
Flag
question a. Purchasing additional government securities, raising reserve requirements and lowering the repo rate.
b. Selling previously bought government securities, reducing reserve requirements and increasing the repo rate.
c. Purchasing additional government securities, reducing reserve requirements and lowering the repo rate.
d.
Selling previously bought government securities, raising reserve requirements, and increasing the repo rate.
Question 9
A company issued 8.5% preference shares at R80 each. What is the intrinsic value of a preference share assuming a 6.5% required rate of return?
Complete
Marked out of
1.00
Flag a. 94.12
question
b. R104.62
c. R123.08
d. R130.77
Question 10
Based on technical analysis, a share should be bought if which of the following condition(s) hold?
Complete
1) The moving average line declines and crosses the share price line.
Marked out of
1.00 2) The moving average line increases and crosses the share price line.
Flag 3) The overbought-oversold (OB-OS) line starts to increase from its maximum negative value.
question
a.
Alternative 1
, b. Alternative 1 and 2
c.
Alternative 1 and 3
d. Alternatives 2 and 3 above
Question 11
Which of the following is not a component outlined by Charles Dow (Dow Theory)?
Complete
Marked out of
1.00
Flag a.
Secondary movements, which last only a few months.
question
b. Bar charts which have one vertical bar representing each day’s price movements.
c.
Primary trends, which are long-term movements, commonly called bear or bull markets.
d. Tertiary moves, which are simply the daily fluctuations. Chartist should plot an assets’ price or the market average each day in order to trace the
primary and secondary trends.
Question 12
The following information relates to Drakensberg Limited’s financial statements.
Complete
Earnings after taxes R150
Marked out of
1.00 Current liabilities R600
Flag Equity R1 350
question
Sales R1 000
Cash R300
Total assets R3 000
Accounts receivable R450
Inventory R600
What is the long-term debt ratio of Drakensberg Limited?
a. 42.75%
b.
43.75%
c. 70.78%
d. 77.78%
Question 13
The following information relates to Drakensberg Limited’s financial statements.
Complete
Earnings after taxes R150
Marked out of
1.00 Current liabilities R600
Flag Equity R1 350
question
Sales R1 000
Cash R300
Total assets R3 000
Accounts receivable R450
Inventory R600
What is the current ratio of Drakensberg Limited?
a.
1.00
b. 2.25
, c.
1.25
d. 0.25
Question 14
Groot Ltd Income statement year ended Groot Ltd balance sheet as at
Complete
31-12- 2023 31-12-2023 R’000s
Marked out of R’000s
1.00
Flag Sales 55 000 ASSETS
question
Cost of Sales 30 500 Fixed assets
Operating expenses 18 500 Net fixed assets 120 500
Operating income 6 000 Current assets
Interest 500 Inventories 74 500
Profit before tax 5 500 Other current assets 70 000
Company tax rate 50% TOTAL ASSETS 265 000
EQUITY AND LIABILITIES
Owners equity 155 000
Liabilities
Long-term loans 95 500
Current liabilities 14 500
TOTAL EQUITY AND
LIABILITIES 265 000
What are the interest coverage ratio and the return on investment ratio respectively?
a. 10× 1.77%
b. 10× 3.23%
c. 12× 1.77%
d. 12× 3.23%
Question 15
Nnana Ltd currently retains 60% of its earnings which are R6 a share this year. It earns an ROE of 30%. Assuming a required rate of return of 22%, how much
Complete would you pay for Nnana Ltd based on the earning multiplier model?
Marked out of
1.00
Flag
question a. R78.92
b.
R79.88
c. R82.88
d.
R70.80
Question 16
The following information relates to KwaZulu Limited.
Complete
Marked out of
Total assets R1 162 000
1.00
Total equity R1 200 000
Flag
question Net profit margin 19.65%
Sales R1 890 000
Current earnings per share R2
Current dividends per share R0.50
What is the return on assets (ROA) of KwaZulu Limited if you use the DuPont model?
a. 30.95%
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