Exam 1: A Brief History of Risk and Return

Louis owns a stock that has had an average geometric return of 10.50 percent and an average arithmetic return of 11.00 percent over the past six years. What average annual rate of return should Louis expect to earn over the next four years?

The additional return earned for accepting risk is called the:

For the period 1926-2018, long-term government bonds had an average return that ________ the average return on long-term corporate bonds while having a standard deviation that ________ the standard deviation of the long-term corporate bonds.

An asset has an average annual historical return of 11.6 percent and a standard deviation of 17.8 percent. What range of returns would you expect to see 95 percent of the time?

Big Town Markets common stock returned 14.3, 12.5, 9.9, 6.5, and 11.1 percent, respectively, over the past five years. What is the arithmetic average return?

Scott purchased 200 shares of Frozen Foods stock for $48 a share. Four months later, he received a dividend of $.22 a share and also sold the shares for $42 each. What was his annualized rate of return on this investment?

Over the past five years, an investment produced annual returns of 16.5, 21, −18, 4, and 17 percent, respectively. What is the geometric average return?

The average risk premium on long-term corporate bonds for the period 1926-2018 was:

Blume's formula is used to:

When we refer to the rate of return on an investment, we are generally referring to the:

Joanne invested $15,000 six years ago. Her arithmetic average return on this investment is 8.72 percent, and her geometric average return is 8.50 percent. What is Joanne's portfolio worth today?

A stock has an average historical risk premium of 6.1 percent. The expected risk-free rate for next year is 2.2 percent. What is the expected rate of return on this stock for next year?

One year ago, you purchased 100 shares of common stock at $25.00 per share. During the past year, you received dividends of $.75 per share. Today, you sold your shares for $24.00 per share. What is your total return on this investment?

Which one of the following should be used as the mean return when you are defining the normal distribution of an investment's annual rates of return?

You own a stock that has produced an arithmetic average return of 8.6 percent over the past five years. The annual returns for the first four years were 16, 11, −19, and 3 percent, respectively. What was the rate of return on the stock in year five?

The average compound return earned per year over a multi-year period when investment inflows and outflows are considered is called the:

The capital gains yield is equal to:

You purchased a stock eight months ago for $55 a share. Today, you sold that stock for $64.50 a share. The stock pays no dividends. What was your annualized rate of return?

John began his investing program with a $6,500 initial investment. The table below recaps his returns each year as well as the amounts he added to his investment account. What is his dollar-weighted average return? Time Investment Return 0 \ 6,500 7.5\% 1 \ 2,500 -4.0\% 2 \ 3,100 5.0\% 3 \ 3,000 8.0\% 4 \ 800 -1.5\%

Capital gains are included in the return on an investment: