1. Chen has $50,000 of his own money to invest. He has a margin loan available to add to this money to purchase Australian shares. The bank’s loan-to-value ratio (LVR) is 75%. How much does Chen have available to purchase a portfolio?
A. $37,500 B. $150,000 C. $200,000 D. $66,667
2. A line of credit facility:
A. does not have a debt limit B. does not require principal payments C. usually has an interest rate lower than the standard variable rate D. Statement B. and C. are both correct
3. Billy needs $35,000 per annum to live on in today’s dollars. If inflation remains low at 3% for the next 10 years, what amount will have the same buying power in 10 years time?
A. $40,000 B. $47,000 C. $45,000
4. Negative gearing is:
A. Where the interest payments are approximately the same level as income earned from an investment. B. Where income earned from the investment is significantly less than interest paid on the borrowing. C. Where the amount borrowed to fund an investment is higher than the equity capital. D. The least risky gearing to use.
5. The percentage of share ownership in Australia by the adult population since 1992 has:
A. increased B. remained constant C. decreased D. initially increased then steadily decreased since 2000
6. A share trader will be more likely to sell share futures contracts rather than the underlying shares if the futures price is:
A. lower than the forward price for the shares B. the same as the forward price for the shares C. higher than the forward price for the shares D. none of the above
7. A futures trader who initially buys a share futures contract at $4.10 and subsequently sells a futures contract in the same share at $4.60 will realize what approximate return on a contract of 1,000 shares which required an initial deposit margin of 15%?
A. -72.5% B. 12.2% C. 72.5% D. 81.3%
8. According to the study by Campbell et al (2000) which of the following asset class has the highest