Quantitative Methods for Finance Practice Questions for Lecture 4
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Quantitative Methods for Finance
Practice Questions for Lecture 4
1. The prices of a stock are given in the table on the right. (a) What is R2 ?
(b) What is R
) ?
(c) What is r3 ?
2. The prices of a stock are given in the table on the right. Calculate (a) R2, R3, and R4 .
(b) R
R
and R
3)
(c) r3 and r5
(d) r3(2) , r4(3) , and r3(3)
3. The prices of a stock in months 1-5 are given below. Please compute the period net, gross and logarithmic returns and fill in the blanks in the table.
|
t |
Pt |
|
1 |
51 |
|
2 |
56 |
|
3 |
53 |
|
4 |
58 |
corresponding single-period, multi-
|
t |
Pt |
Rt |
1+Rt |
1 + Rt(3) |
rt |
r(3) |
|
1 |
200 |
× |
× |
× |
× |
× |
|
2 |
192 |
|
|
× |
|
× |
|
3 |
198 |
|
|
× |
|
× |
|
4 |
206 |
|
|
|
|
|
|
5 |
210 |
|
|
|
|
|
4. True or False questions
(1) The k-period log return is the product of k terms of single-period log returns.
(2) Log returns are also called continuously-compounded returns.
(3) Random walks imply that stock prices are predictable.
(4) The continuous-time version of a random walk is a Brownian motion.
1(a) 9.80%
1(b) 13.73%
1(c) -5.51%
2(a) 2.78%, -4. 17%, -2.78%
2(b) -4. 17%, -2.78%, -4.05%
2(c) -7.00%, 1.42%
2(d) -4.26%, -2.82%, - 1.40%
3. Do it by yourself
4. (2)
2023-04-14