Exam 5: Risk, Return, and the Historical Record

If a portfolio had a return of 12%, the risk-free asset return was 4%, and the standard deviation of the portfolio's excess returns was 25%, the risk premium would be

If a distribution has "fat tails," it exhibits

If an investment provides a 2% return semi-annually, its effective annual rate is

A year ago, you invested $2,500 in a savings account that pays an annual interest rate of 5.7%. What is your approximate annual real rate of return if the rate of inflation was 1.6% over the year?

An investor purchased a bond 45 days ago for $985. He received $15 in interest and sold the bond for $980. What is the holding-period return on his investment?

If the annual real rate of interest is 4%, and the expected inflation rate is 2%, the nominal rate of interest would be approximately

If the annual real rate of interest is 2.5%, and the expected inflation rate is 1.0%, the nominal rate of interest would be approximately

Practitioners often use a ________% VaR, meaning that ________% of returns will exceed the VaR, and ________% will be worse.

Over the past year, you earned a nominal rate of interest of 9% on your money. The inflation rate was 3% over the same period. The exact actual growth rate of your purchasing power was

You have been given this probability distribution for the holding-period return for a stock: Stock of the Economy Probability HPR Boom 0.40 22\% Normal growth 0.35 11\% Recession 0.25 -9\% What is the expected standard deviation for the stock?

Which of the following determine(s) the level of real interest rates?I) The supply of savings by households and business firmsII) The demand for investment fundsIII) The government's net supply and/or demand for funds

________ is a risk measure that indicates vulnerability to extreme negative returns.

A year ago, you invested $10,000 in a savings account that pays an annual interest rate of 3%. What is your approximate annual real rate of return if the rate of inflation was 4% over the year?

When a distribution is negatively skewed,

If the annual real rate of interest is 2.5%, and the expected inflation rate is 3.4%, the nominal rate of interest would be approximately

The risk premium for common stocks

You have been given this probability distribution for the holding-period return for GM stock: Stock of the Economy Probability HPR Boom 0.40 30\% Normal growth 0.40 11\% Recession 0.20 -10\% What is the expected variance for GM stock?

If a portfolio had a return of 12%, the risk-free asset return was 4%, and the standard deviation of the portfolio's excess returns was 25%, the Sharpe measure would be

Over the past year, you earned a nominal rate of interest of 3.6% on your money. The inflation rate was 3.1% over the same period. The exact actual growth rate of your purchasing power was

Which combination of returns and standard deviation provides the highest Sharpe ratio? Assume a 3% risk free rate.