Exam 10: Some Lessons From Capital Market History

One year ago, you purchased 800 shares of stock for $37 per share.The stock pays $0.25 a share in dividends each year.Today, you sold your shares for $43.25 per share.What is your total dollar return on this investment?

Semistrong form market efficiency states that the value of a security is based on:

Over the past four years, the annual percentage returns on large-company stocks were 15, 7, 4, and 18 percent.For the same time period, U.S.Treasury bills produced the returns of 6, 3, 2, and 4 percent.Inflation averaged 2.8 percent over the four-year period.The average real rate of return on large-company stocks was ___ percent as compared to _____ percent for Treasury bills.

Over the period of 1926-2014:

Over the period of 1926-2014, which one of the following investment classes had the highest volatility of returns?

The rate of return on which one of the following has a risk premium of 0%?

Which one of the following statements is correct concerning both the dollar return and the percentage return on a stock investment?

The historical returns on large-company stocks, as reported by Ibbotson and Sinquefield and reported in your textbook, are based on the:

New Labs just announced that it has received a patent for a product that will eliminate all flu viruses.This news is totally unexpected and viewed as a major medical advancement.Which one of the following reactions to this announcement indicates the market for New Labs stock is efficient?

The common stock of Mountain Farms has yielded 14.2 percent, 11.7 percent, 3.4 percent, -2.8 percent, and 15.8 percent over the past five years, respectively.What is the geometric average return?

Suppose you bought a$1,000 face value bond with a 5 percent coupon one year ago for $1,020.The bond sells today for $986.If the inflation rate last year was 2.3 percent, what was your total real rate of return on this investment?

The lower the standard deviation of returns on a security, the _____ the expected rate of return and the _____ the risk.

Which one of the following statements is true regarding the period 1926-2014?

Your portfolio has provided you with returns of 11.4 percent, 6.2 percent, -.7 percent, and 14.6 percent over the past four years, respectively.What is the geometric average return for this period?

According to the efficient markets hypothesis, professional investors will earn:

Over the last four years, the common stock of Plymouth Shippers has had an arithmetic average return of 10.4 percent.Three of those four years produced returns of 16.1 percent, 15.6 percent, and 9.4 percent, respectively.What is the geometric average return for this four-year period?

Which one of the following is defined as a bell-shaped frequency distribution that is defined by its average and its standard deviation?

Assume that large-company stocks had an average return of 12.1 percent and a standard deviation of 19.6 percent for a 40-year period.What range of returns would you expect to see on these stocks 95 percent of the time?

What is the probability associated with a return that lies in the upper tail when the mean plus two standard deviations is graphed?

One year ago, you purchased 500 shares of stock for $22 a share.The stock pays $0.32 a share in dividends each year.Today, you sold your shares for $24.50 a share.What is your total dollar return on this investment?