NGEE ANN POLYTECHNIC

SCHOOL OF BUSINESS & ACCOUNTANCY

INVESTMENTS (IV)

Tutorial 1 Investments Overview + Risk & Return Concepts

Note to students: Typed questions are only given for Tutorial 1. You have to refer to the
textbook for the full questions from Tutorial 2 onwards.
Concept Question
Chapter 12 Page 436: Question 3
Classify the following events as mostly systematic or mostly unsystematic. Is the distinction
clear in every case?
a) Short-term interest rates increase unexpectedly
b) The interest rate a company pays on its short-term debt borrowing is increased by its
bank
c) Oil prices unexpectedly decline
d) An oil tanker ruptures, creating a large oil spill
e) A manufacturer loses a multi-million-dollar product liability suit
f) A Supreme Court decision substantially broadens producer liability for injuries
suffered by product users
Questions and Problems
Chapter 1 Page 38: Question 7
A particular stock has a dividend yield of 1.2%. Last year, the stock price fell from $65 to
$59. What was the return for the year?
Chapter 1 Page 38: Question 11
An investment has an expected return of 12% per year with a standard deviation of 6%.
Assuming that the returns on this investment are at least roughly normally distributed, how
frequently do you expect to lose money?
Chapter 1 Page 38: Question 15
Your grandfather invested $1,000 in a stock 50 years ago. Currently the value of his account
is $324,000. What is his geometric return over this period?
Chapter 1 Page 39: Question 19
A stock has had the following year-end prices and dividends:
Year
0
1
2
3
4
5

Price ($)
13.25
15.61
16.72
15.18
17.12
20.43

Dividend ($)
0.15
0.18
0.20
0.24
0.28

What are the arithmetic and geometric returns for the stock? (Hint: Calculate the respective
years Total Percent Return first before you calculate the AM and GM)
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NGEE ANN POLYTECHNIC

SCHOOL OF BUSINESS & ACCOUNTANCY
INVESTMENTS (IV)
CFA Exam Review by Schweser
Chapter 1 Page 40: Question 3
Ms Yamisaka has determined that the average monthly return of another Mega client was
1.63% during the past year. What is the annualized rate of return?
Short Answer Questions
1. Differentiate between gambling, investing and trading (Read the articles The Difference
between Investing and Trading & I'm an Investor, Not a Trader for more info).
2. What are some of the possible reasons that can move a share price to go up or down?
Hint: View this video to get some pointers: https://www.youtube.com/watch?v=4okrQHOHJ-c

Self-Practice Questions (Will not be covered in tutorials)

Note to students: The following are additional questions that you can practice on your own
to better grasp the concepts taught in lectures. The answers are provided at the end of the
textbook in either Appendix A or Appendix B, hence they will not be covered in tutorials.
Test Your Investment Quotient
Chapter 1 Page 35: Question 1 to 12
Chapter 2 Page 70: Question 1, 2, 11, 12, 13, 15
Chapter 3 Page 96: Question 1, 2, 3, 5
Chapter 12 Page 435: Question 8 to 11, 14
Questions & Problems
Chapter 1 Page 38: Question 5, 9, 17
Chapter 2 Page 74: Question 21

Admin Matters
1. Project Group Formation

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NGEE ANN POLYTECHNIC

SCHOOL OF BUSINESS & ACCOUNTANCY
INVESTMENTS (IV)
Common Investment Terminologies
Match the following terms to the definitions that best describe it.
(A) Blue-chip Stocks
(B) S-Chip Stocks
(C) Big Cap Stocks
(D) Mid Cap Stocks
(E) Small Cap Stocks

( ) Stock market prices are rising or expected

to rise
( ) Stocks earnings that are stable regardless
of the state of the economy
( ) Buying of shares
( ) Stocks earnings that are expected to grow
at an above-average rate relative to the market
( ) Stock market prices are falling or expected
to fall

(F) Fledging Stocks

( ) Stocks that tend to trade at a lower price

relative to the fundamentals / intrinsic value

(G) Penny Stocks

( ) Stocks earnings that fluctuate accordingly

with the state of the economy

(H) Defensive Stocks

( ) Chinese companies listed on SGX

(I) Cyclical Stocks

( ) Generally referring to stock prices that are

less than $0.20

(J) Dividend Stocks

( ) Remaining companies within the top 98%

in terms of market cap after Mid Cap Stocks

(K) Value Stocks

( ) Remaining bottom 2% of the companies by

market cap after Small Cap Stocks

(L) Growth Stocks

( ) Selling of shares

(M) Market Cap or

Market Capitalization

( ) The top 30 largest market cap stocks

(N) Bull Market

( ) Stocks of large, well-established and

financially sound company that has operated
for many years. In local context, it also refers
to the 30 STI component stocks.

(O) Bear Market

( ) Stocks that gives stable dividends

(P) Long

( ) Shares outstanding * last traded price

(Q) Short

( ) The next 50 largest market cap stocks

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