Exam 5: Risk, Return, and the Historical Record

A year ago, you invested $10,000 in a savings account that pays an annual interest rate of 5%. What is your approximate annual real rate of return if the rate of inflation was 1.5% over the year?

You purchase a share of CAT stock for $90. One year later, after receiving a dividend of $4, you sell the stock for $97. What was your holding-period return?

A year ago, you invested $1,000 in a savings account that pays an annual interest rate of 9%. What is your approximate annual real rate of return if the rate of inflation was 2% over the year?

If an investment provides a 3% return semi-annually, its effective annual rate is

Which of the following statement(s) is(are) true?I) The real rate of interest is determined by the supply and demand for funds.II) The real rate of interest is determined by the expected rate of inflation.III) The real rate of interest can be affected by actions of the Fed.IV) The real rate of interest is equal to the nominal interest rate plus the expected rate of inflation.

If the interest rate paid by borrowers and the interest rate received by savers accurately reflect the realized rate of inflation,

You have been given this probability distribution for the holding-period return for KMP stock: Stock of the Economy Probability HPR Boom 0.30 18\% Normal growth 0.50 12\% Recession 0.20 -5\% What is the expected standard deviation for KMP stock?

A portfolio generates a Sharpe ratio of 0.83. Which of the following benchmark Sharpe ration would be considered show the portfolio over performed?

Which of the following measures of risk best highlights the potential loss from extreme negative returns?

Historical records regarding return on stocks, Treasury bonds, and Treasury bills between 1926 and 2018 show that

Annual percentage rates (APRs) are computed using

If a portfolio had a return of 8%, the risk-free asset return was 3%, and the standard deviation of the portfolio's excess returns was 20%, the Sharpe measure would be

Which of the following statement(s) is(are) true?

If an investment provides a 0.78% return monthly, its effective annual rate is

You have been given this probability distribution for the holding-period return for Cheese, Inc. stock: Stock of the Economy Probability HPR Boom 0.20 24\% Normal growth 0.45 15\% Recession 0.35 8\% Assuming that the expected return on Cheese's stock is 14.35%, what is the standard deviation of these returns?

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 standard deviation for GM stock?

You purchased a share of stock for $25. One year later, you received $1 as a dividend and sold the share for $29. What was your holding-period return?

Over the past year, you earned a nominal rate of interest of 14% on your money. The inflation rate was 2% over the same period. The exact actual growth rate of your purchasing power was

"Bracket Creep" happens when

You have been given this probability distribution for the holding-period return for KMP stock: Stock of the Economy Probability HPR Boom 0.30 18\% Normal growth 0.50 12\% Recession 0.20 -5\% What is the expected holding-period return for KMP stock?