Search

30 questions · 1 formulas

Cap-rate spread

Spread = Cap rate − Government bond yield

Hypothesis TestingE-level★ High priority — official Canvas example

Financial-return regression: interest-rate p=.009, recession p=.089, credit-spread p=.455. At 5%, which explanatory variables reject H0?

→ A) Interest rate only

Canvas Example MCQ — Q71

A) Interest rate only
B) Interest rate and Recession dummy
C) Recession dummy only
D) Credit spread only
E) All three explanatory variables

Only .009 < .05.

Rule: At 5%, .089 is not significant.

Hypothesis TestingE-level★ High priority — official Canvas example

Credit spread p=.455. Correct conclusion at 5%?

→ B) Fail to reject H0 because 0.455 > 0.05.

Canvas Example MCQ — Q73

A) Reject H0 because 0.455 > 0.05.
B) Fail to reject H0 because 0.455 > 0.05.
C) Accept H0 and conclude the true coefficient equals exactly zero.
D) Reject H0 because the estimated coefficient is positive.
E) The test cannot be performed because the coefficient is positive.

The coefficient is not statistically significant at 5%. This does not prove its true value is exactly zero.

Rule: Do not “accept” H0 as proven.

Returns & CompoundingE-levelVery high priority

Suppose that you purchased a house in the US 2000:Q1 for $2.5 million. If the price of that house has followed the US house price index until 2022:Q2, what is the geometric mean quarterly return of your house investment? How much was the house worth 2022:Q2?

→ D) The geometric mean returns is 1.113 %, and the house was worth $ 6 692 431

Old Exam — Oct 2022, Q9

Given: Historical HPI dataset question. Current adaptation: ending value = initial value x index_end/index_start; geometric quarterly return = (ending/beginning)^(1/n)-1.

A) The geometric mean returns is 1.126 %, and the house was worth $6 772 849
B) The geometric mean returns is 1.279 %, and the house was worth $ 7 749 444
C) The geometric mean returns is 1.240 %, and the house was worth $ 7 485 119
D) The geometric mean returns is 1.113 %, and the house was worth $ 6 692 431
E) None of the above (A, B, C, D) is close to be correct.

Historical external-data result: D) The geometric mean returns is 1.113 %, and the house was worth $ 6 692 431. Current paper-exam use: if the needed index levels/returns are supplied, apply the relevant return, compounding or correlation formula by hand; do not depend on the old spreadsheet.

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Returns & CompoundingE-levelVery high priority

The country that has the highest (maximum) standard deviation of the mean quarterly returns is________.

→ D) Croatia with standard deviation of 24.05 %

Old Exam — Dec 2021 re-exam, Q8

Given: Historical HPI dataset question; keep the concept of comparing standard deviations.

A) Slovenia with standard deviation of 24.97 %
B) Slovenia with standard deviation of 58.79 %
C) Croatia with standard deviation of 35.20 %
D) Croatia with standard deviation of 24.05 %
E) None of the above (A, B, C, D) is close to be correct.

Historical external-data result: D) Croatia with standard deviation of 24.05 %. Current paper-exam use: if the needed index levels/returns are supplied, apply the relevant return, compounding or correlation formula by hand; do not depend on the old spreadsheet.

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Returns & CompoundingE-levelVery high priority

If you had invested SEK 250 000 in the Swedish housing market index 1975:Q1 (first quarter year 1975), then your investment is worth at the end of 2021:Q2 _________

→ C) SEK 4 323 050

Old Exam — Dec 2021 re-exam, Q9

Given: Historical HPI index-growth question; current adaptation: V_end=V_start x Index_end/Index_start.

A) SEK 8 549 279.
B) SEK 2 454 658.
C) SEK 4 323 050
D) SEK 4 393 259.
E) None of the above (A, B, C, D) is close to be correct.

Historical external-data result: C) SEK 4 323 050. Current paper-exam use: if the needed index levels/returns are supplied, apply the relevant return, compounding or correlation formula by hand; do not depend on the old spreadsheet.

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Returns & CompoundingE-levelVery high priority

The pairwise correlation coefficient of quarterly returns between Sweden and UK is

→ A) 0.52

Old Exam — Dec 2021 re-exam, Q10

Given: Historical correlation question. Correlation is a unit-free number between -1 and +1; 0.52 means 0.52, not 52%.

A) 0.52
B) 52.
C) 0.52 %.
D) 1.00 %.
E) None of the above (A, B, C, D) is close to be correct.

Historical external-data result: A) 0.52. Current paper-exam use: if the needed index levels/returns are supplied, apply the relevant return, compounding or correlation formula by hand; do not depend on the old spreadsheet.

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Returns & CompoundingD–A levelVery high priority

For the entire time period, December 1971 to September 2021, what is the monthly geometric mean return?

→ B) 0.93%.

Old Exam — Dec 2021 re-exam, Q11

Given: Historical REIT data; geometric monthly mean is compound growth rate.

A) 1.05%.
B) 0.93%.
C) 12.05%.
D) 2.25%.
E) None of the above (A, B, C, D) is close to be correct.

Historical external-data result: B) 0.93%.. Current paper-exam use: if the needed index levels/returns are supplied, apply the relevant return, compounding or correlation formula by hand; do not depend on the old spreadsheet.

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Returns & CompoundingD–A levelVery high priority

For the entire time period, December 1971 to September 2021, what is the monthly arithmetic mean return?

→ A) 1.05%.

Old Exam — Dec 2021 re-exam, Q12

Given: Historical REIT data; arithmetic monthly mean is simple average of monthly returns.

A) 1.05%.
B) 0.93%.
C) 12.05%.
D) 2.25%.
E) None of the above (A, B, C, D) is close to be correct.

Historical external-data result: A) 1.05%.. Current paper-exam use: if the needed index levels/returns are supplied, apply the relevant return, compounding or correlation formula by hand; do not depend on the old spreadsheet.

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Returns & CompoundingE-levelVery high priority

The country that has the highest (maximum) arithmetic mean quarterly return is________.

→ D) Croatia with arithmetic mean return of 11.62 %

Old Exam — Oct 2021, Q6

Given: Historical HPI dataset question; keep the concept of comparing arithmetic means across countries.

A) Slovenia with arithmetic mean return of 9.30 %
B) Israel with arithmetic mean return of 6.79 %
C) Sweden with arithmetic mean return of 11.62 %
D) Croatia with arithmetic mean return of 11.62 %
E) None of the above (A, B, C, D) is close to be correct.

Historical external-data result: D) Croatia with arithmetic mean return of 11.62 %. Current paper-exam use: if the needed index levels/returns are supplied, apply the relevant return, compounding or correlation formula by hand; do not depend on the old spreadsheet.

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Returns & CompoundingE-levelVery high priority

The lowest (minimum) and highest (maximum) simple return observed among all countries and quarters is _________

→ A) ‒17.4% and 192.7%

Old Exam — Oct 2021, Q7

Given: Historical HPI dataset question; keep the concept of min/max simple returns.

A) ‒17.4% and 192.7%
B) ‒17.4% and 60.88%
C) ‒17.4% and 120.78%
D) ‒60.88% and 17.4%.
E) None of the above (A, B, C, D) is close to be correct.

Historical external-data result: A) ‒17.4% and 192.7%. Current paper-exam use: if the needed index levels/returns are supplied, apply the relevant return, compounding or correlation formula by hand; do not depend on the old spreadsheet.

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Returns & CompoundingE-levelVery high priority

The highest (maximum) pairwise correlation coefficient of quarterly returns is between

→ A) Croatia and Slovenia.

Old Exam — Oct 2021, Q8

Given: Historical HPI dataset question; keep the concept of comparing pairwise correlations.

A) Croatia and Slovenia.
B) UK and US.
C) Sweden and Norway.
D) Israel and Slovenia.
E) None of the above (A, B, C, D) is close to be correct.

Historical external-data result: A) Croatia and Slovenia.. Current paper-exam use: if the needed index levels/returns are supplied, apply the relevant return, compounding or correlation formula by hand; do not depend on the old spreadsheet.

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Returns & CompoundingE-levelVery high priority

Suppose that you invested $10 000 in January 1998. What was the value of that investment in September 2021?

→ B) $82 022.

Old Exam — Oct 2021, Q9

Given: Historical REIT index-data question; current adaptation: ending value = initial value x ending total-return index / starting index.

A) $24 641.
B) $82 022.
C) $104 224.
D) $720 000.
E) None of the above (A, B, C, D) is close to be correct.

Historical external-data result: B) $82 022.. Current paper-exam use: if the needed index levels/returns are supplied, apply the relevant return, compounding or correlation formula by hand; do not depend on the old spreadsheet.

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Model Fit & RMSED–A levelVery high priority

Estimate following model using the data br5 (sheet “br5” in the Excel file “exam_data_AI2152.xlsx”). Use all 900 observations to estimate the regression model: The estimated coefficient of the variable Pool is closest to_________

→ C) 0.0704

Old Exam — Oct 2023, Q9

Given: Historical software-dependent regression. Current adaptation: if a regression output is given, read the POOL coefficient directly and interpret it based on model form.

A) 0.0572
B) 0.0043
C) 0.0704
D) 0.1267
E) None of the above (A, B, C, D) is close to be correct.

Current exam rule: prediction uses the stated fitted equation; lower RMSE/AIC/SC is preferred when the criterion is being minimized; hold-out data must remain outside estimation/selection. Source answer: C) 0.0704.

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Model Fit & RMSED–A levelVery high priority

What is the Schwarz criterion (SC) for the model above (MCQ 9)? Use the formula The SC is closest to_________

→ A) ‒2.650

Old Exam — Oct 2023, Q10

Given: Historical model-selection calculation using Schwarz/BIC. Current concept: lower (more negative) SC/BIC is preferred.

A) ‒2.650
B) ‒2.930
C) ‒4.650
D) 2.930
E) None of the above (A, B, C, D) is close to be correct.

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Model Fit & RMSED–A levelVery high priority

In the original exam, the model was estimated using a supplied dataset.xlsx”). However this time use the first 850 observations to estimate the regression model: You want to compute the hold-out RMSE for the last 50 observations. The hold-out RMSE is closest to_______.

→ D) 0.2798

Old Exam — Oct 2023, Q11

Given: Historical hold-out RMSE calculation. Current concept: estimate on training sample only, predict test sample, RMSE=sqrt(mean squared prediction error).

A) 3.9149
B) 0.0783
C) 0.2852
D) 0.2798
E) None of the above (A, B, C, D) is close to be correct.

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Model Fit & RMSED–A levelVery high priority

Using the above model, predict the prices of a house with 2500 square feet that is not close to the university. Use the natural predictor (not the corrected predictor). The predicted price is closest to

→ B) $212 021

Old Exam — Dec 2022, Q23

Given: Historical software-dependent prediction question. Original model: ln(PRICE)=b0+b1 ln(SQFT)+d1 CLOSE+d2[CLOSE x ln(SQFT)].

A) $207 479
B) $212 021
C) $218 756
D) $225 335
E) None of the above (A, B, C, D) is close to be correct.

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Model Fit & RMSED–A levelVery high priority

Using the above model, predict the prices of a house with 2500 square feet that is close to the university. Use the natural predictor (not the corrected predictor). The predicted price is closest to

→ C) $303 169

Old Exam — Dec 2022, Q24

Given: Same historical prediction model as Q23, but CLOSE=1.

A) $228 665
B) $282 742
C) $303 169
D) $315 158
E) None of the above (A, B, C, D) is close to be correct.

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Model Fit & RMSED–A levelVery high priority

→ A) $207 479

Old Exam — Oct 2022, Q17

Given: Historical software-dependent prediction; keep the log-model prediction concept, not the original spreadsheet mechanics.

A) $207 479
B) $185 650
C) $218 756
D) $204 454
E) None of the above (A, B, C, D) is close to be correct.

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Model Fit & RMSED–A levelVery high priority

Using the above model, predict the prices of a house with 2500 square feet that is close to the university. Use the natural predictor (not the corrected predictor). The predicted price is closest to

→ B) $282 742

Old Exam — Oct 2022, Q18

Given: Same as Q17 but dummy CLOSE=1.

A) $228 665
B) $282 742
C) $235 545
D) $265 350
E) None of the above (A, B, C, D) is close to be correct.

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Chi-square & Time SeriesD–A levelLegacy / lower priority

Do an augmented Dickey–Fuller test by estimating following model with three augmentation terms: The size of the  (tau) statistic is closest to_______

→ D) ‒5.626

Old Exam — Oct 2023, Q12

Given: Historical ADF regression output. Current concept: the ADF tau statistic tests a unit root; more negative than critical -> reject unit root.

A) ‒1.586
B) ‒3.865
C) ‒2.475
D) ‒5.626
E) None of the above (A, B, C, D) is close to be correct.

Legacy time-series recognition question. Keep the concept (stationarity, lag notation, ADF or HAC logic), not the old software step. Source answer: D) ‒5.626.

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Chi-square & Time SeriesD–A levelLegacy / lower priority

Historical data file supplied in the original exam.xlsx, sheet usmacro. The dependent variable (the y-variable) u (or U) is the U.S. unemployment rate. The variable g (or G) denotes the x-variable which is the U.S. GDP growth rate. The variable inf is not used in this question. See the data definitions in the sheet usmacro_data_def. Assume that all variables are stationary. Estimate an ARDL(p, q) where p = 2 and q = 4. The estimated coefficient of the variable Gt-3 is closest to_________

→ B) 0.04830

Old Exam — Dec 2022, Q27

Given: Historical software-dependent ARDL estimate. Current use: recognize lag notation; G(t-3) is the third lag of G.

A) -0.01451
B) 0.04830
C) 0.06729
D) 0.063539
E) None of the above (A, B, C, D) is close to be correct.

Legacy time-series recognition question. Keep the concept (stationarity, lag notation, ADF or HAC logic), not the old software step. Source answer: B) 0.04830.

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Chi-square & Time SeriesD–A levelLegacy / lower priority

Historical data file supplied in the original exam.xlsx, sheet usmacro. The dependent variable (the y-variable) u (or U) is the U.S. unemployment rate. The variable g (or G) denotes the x-variable which is the U.S. GDP growth rate. The variable inf is not used in this question. See the data definitions in the sheet usmacro_data_def. Estimate an ARDL(p, q) model where p = 3 and q = 3. The estimated coefficient of the variable Gt-3 is closest to_________

→ D) 0.063539

Old Exam — Oct 2022, Q20

Given: Historical software-dependent ARDL coefficient question; keep lag interpretation only.

A) -0.031929
B) ‒0.700001
C) 0.010511
D) 0.063539
E) None of the above (A, B, C, D) is close to be correct.

Legacy time-series recognition question. Keep the concept (stationarity, lag notation, ADF or HAC logic), not the old software step. Source answer: D) 0.063539.

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Chi-square & Time SeriesD–A levelLegacy / lower priority

Estimate the ARDL(p, q) model The estimated coefficient of the variable Ut-3 is_________

→ A) 0.0764.

Old Exam — Oct 2021, Q22

Given: Historical ARDL coefficient question; current adaptation: understand lag notation and that coefficients are estimated from supplied regression output/data.

A) 0.0764.
B) ‒0.0482.
C) ‒0.7151.
D) 0.0100.
E) None of the above (A, B, C, D) is close to be correct.

Legacy time-series recognition question. Keep the concept (stationarity, lag notation, ADF or HAC logic), not the old software step. Source answer: A) 0.0764..

Rule: The old exam supplied a spreadsheet/software. For the 2026 paper exam, expect the necessary values/table/output to be printed. Use the method, not the historical data file.

Returns & CompoundingD–A levelVery high priority

Three investment scenarios each turn $100 into $350 of total cash returned over 5 years, but with different cash-flow timing: Scenario 1 (all at end) has IRR=28.47%, Scenario 2 (spread over time) has IRR=44.34%, Scenario 3 (more return early) has IRR=56.95%. Why do all three scenarios share the same CAGR (28.47%) and Investment Multiple (3.5x), yet have different IRRs?

→ A) CAGR and Multiple depend only on beginning and ending wealth over the whole period, while IRR also accounts for the timing of each interim cash flow

Computer Lab 2 — Exercise 2A

A) CAGR and Multiple depend only on beginning and ending wealth over the whole period, while IRR also accounts for the timing of each interim cash flow
B) The calculations contain an error — equal multiples must always produce equal IRRs
C) IRR is independent of timing; the difference must come from rounding
D) Multiple and CAGR used a different total cash amount in each scenario

Multiple = total cash returned/initial investment = 350/100 = 3.5x and CAGR = 3.5^(1/5)-1 = 28.47% for all three, since total dollars and duration are identical. IRR, however, is sensitive to WHEN cash is received: receiving money earlier allows it to be 'reinvested' implicitly at the IRR, raising the computed IRR.

Rule: Multiple and CAGR are driven only by beginning/ending wealth; IRR is additionally sensitive to the timing of interim cash flows.

Bonds & Cap RatesD–A levelVery high priority

A company plans 5-year BBB bonds. Same-maturity AAA yield=4.0%, market risk premium=5.0%, BBB debt beta=0.10. Average-times default rate=0.5%, loss rate=60%. What YTM should be set, and what is the credit spread over AAA, in average economic times?

→ A) YTM≈4.80%; spread≈0.80%

Computer Lab 2 — Exercise 3, Problem 12.17

A) YTM≈4.80%; spread≈0.80%
B) YTM≈4.50%; spread≈0.50%
C) YTM≈4.00%; spread≈0.00%
D) YTM≈6.90%; spread≈2.90%

Required expected return via CAPM: r_d = 4.0%+0.10×5.0% = 4.50%. YTM = r_d + p×L = 4.50%+0.5%×60% = 4.50%+0.30% = 4.80%. Spread over AAA = 4.80%−4.00% = 0.80%.

Rule: Set promised YTM = required expected return (from debt CAPM) plus the expected default-loss compensation (p×L).

Bonds & Cap RatesE-levelVery high priority

A property has a cap rate of 6.0% and the comparable government bond yield is 4.0%. What is the cap rate spread, in basis points?

→ A) 200 bps

Computer Lab 4 — Exercise 1, Task 6

A) 200 bps
B) 20 bps
C) 2 bps
D) 1.5 bps (ratio of the two rates)

Spread = Cap Rate − Government Bond Yield = 6.0% − 4.0% = 2.0 percentage points = 200 basis points.

Rule: Cap rate spread = Cap Rate − Government Bond Yield; 1 percentage point = 100 bps.

Bonds & Cap RatesE-levelVery high priority

Starting from Cap Rate = Government Bond Yield + Spread, which rearrangement correctly derives the cap rate spread?

→ A) Spread = Cap Rate − Government Bond Yield

Computer Lab 4 — Exercise 1, Task 7

A) Spread = Cap Rate − Government Bond Yield
B) Spread = Cap Rate + Government Bond Yield
C) Spread = Government Bond Yield − Cap Rate
D) Spread = Cap Rate × Government Bond Yield

Simple algebra: subtract Government Bond Yield from both sides of Cap Rate = Government Bond Yield + Spread.

Rule: Always isolate the unknown term via basic algebraic rearrangement.

Bonds & Cap RatesE-levelVery high priority

NY CBD office cap rate is 5.75% and the comparable 10-year Treasury yield is 5.00%. What is the cap rate spread, and how should it be interpreted?

→ A) 75 bps; a relatively small premium given office property's additional risks

Computer Lab 4 — Exercise 1, Task 8

A) 75 bps; a relatively small premium given office property's additional risks
B) 675 bps; an unusually large premium
C) 75 bps; abnormally large for office property
D) 0.75 bps; essentially no premium

Spread = 5.75% − 5.00% = 0.75 percentage points = 75 basis points, which is a comparatively modest premium relative to the vacancy, leasing, operating and liquidity risks of office property, making Treasuries relatively attractive by comparison.

Rule: Compare the computed spread's economic magnitude to the asset's risk profile, not just its sign.

Bonds & Cap RatesD–A levelVery high priority

Based on the lab's source, over the most recent year did the cap rate spread (cap rate minus Treasury yield) narrow or widen, and what mainly drove the change?

→ A) Narrowed, mainly because the 10-year Treasury yield rose while average cap rates stayed broadly stable

Computer Lab 4 — Exercise 1, Task 11

A) Narrowed, mainly because the 10-year Treasury yield rose while average cap rates stayed broadly stable
B) Widened, mainly because cap rates fell sharply
C) Narrowed, mainly because cap rates fell sharply
D) Widened, mainly because the Treasury yield fell

Since Spread = Cap Rate − Treasury Yield, and the Treasury yield rose while the average cap rate stayed roughly stable, the spread shrank (narrowed).

Rule: To determine spread direction, track Cap Rate and Treasury Yield separately, then take the difference.

Hypothesis TestingE-level★ High priority — official Canvas example

A financial-return regression reports p-values: interest rate p = .009, recession dummy p = .089, credit spread p = .455. At the 10% level, which variables reject H0: β = 0?

→ C) Interest rate and Recession dummy

Canvas Example MCQ — Q72

A) Interest rate only
B) Recession dummy only
C) Interest rate and Recession dummy
D) Interest rate and Credit spread
E) All three explanatory variables

.009 < .10 and .089 < .10; .455 > .10.

Rule: Reject H0 when p < α; changing α can change the conclusion.