Alternative Investments - Alternative Investments Section 2
- Option : A
- Explanation : When futures prices are lower than the spot price, the commodity forward curve is downward sloping, and the prices are referred to as being in backwardation. Backwardation occurs when the convenience yield is high.
| Characteristic | BMA | AKD |
| Annualized returns | 24% | 16% |
| Track Record | 3 years | 7 years |
| Fees | 1.25 and 12 | 1.75 and 18 |
| Sharpe Ratio | 1.5 | 1.8 |
Based on the above information, the investor is most likely to:
- Option : A
- Explanation : First he should research how returns are calculated and if they are comparable before making any decision.
- Option : C
- Explanation : The maximum value AKD is most likely to assign is that using the highest multiple (7 × PKR400 billion = PKR2,800 billion)
- Option : A
- Explanation : BMA is most likely to use average quotes. The securities are actively traded so no liquidity adjustment is required. If the fund uses bid/ask prices, the fund would use ask prices for shorts and bid prices for longs, i.e. the prices at which the positions could be closed
| Financing percentage: | 75% |
| Market capitalization rate: | 8% |
| Cost of equity: | 10% |
Which of the following is most likely to be appraisal price of the building?
