Question 1

The average risk premium on large-company stocks for the period 1926-2018 was:

Accepted Answer

A) 6.7% 
B) 8.3% 
C) 8.5% 
D) 12.3% 
E) 13.6% 
A) 6.7% 
B) 8.3% 
C) 8.5% 
D) 12.3% 
E) 13.6%

Question 2

One year ago, you purchased 200 shares of Southern Foods common stock for $39.50 a share. Today, you sold your shares for $35.40 a share. During this past year, the stock paid $1.36 in dividends per share. What is your dividend yield on this investment?

Accepted Answer

A) 3.165% 
B) 3.375% 
C) 3.443% 
D) 3.533% 
E) 3.610% 
A) 3.165% 
B) 3.375% 
C) 3.443% 
D) 3.533% 
E) 3.610%

Question 3

A stock has an average historical return of 10.7 percent and a standard deviation of 19.3 percent. Which range of returns would you expect to see approximately two-thirds of the time?

Accepted Answer

A) 8.6% to + 30.0% 
B) +4.6% to + 33.8% 
C) −8.6% to + 30.0% 
D) −3.9% to + 32.5% 
E) −8.9% to + 31.5% 
A) 8.6% to + 30.0% 
B) +4.6% to + 33.8% 
C) −8.6% to + 30.0% 
D) −3.9% to + 32.5% 
E) −8.9% to + 31.5%

Question 4

The risk premium is defined as the rate of return on:

Accepted Answer

A) a risky asset minus the risk-free rate. 
B) the overall market. 
C) a U.S. Treasury bill. 
D) a risky asset minus the inflation rate. 
E) a riskless investment. 
A) a risky asset minus the risk-free rate. 
B) the overall market. 
C) a U.S. Treasury bill. 
D) a risky asset minus the inflation rate. 
E) a riskless investment.

Question 5

Over the past four years, a stock produced returns of 13, 6, −5, and 18 percent, respectively. What is the standard deviation of these returns?

Accepted Answer

A) 8.63% 
B) 9.93% 
C) 9.97% 
D) 10.11% 
E) 10.15% 
A) 8.63% 
B) 9.93% 
C) 9.97% 
D) 10.11% 
E) 10.15%

Question 6

A frequency distribution, which is completely defined by its average (mean)and variance or standard deviation, is referred to as a(n):

Accepted Answer

A) normal distribution. 
B) variance distribution. 
C) expected rate of return. 
D) average geometric return. 
E) average arithmetic return. 
A) normal distribution. 
B) variance distribution. 
C) expected rate of return. 
D) average geometric return. 
E) average arithmetic return.

Question 7

Jefferson Mills stock produced returns of 14.8, 22.6, 5.9, and 9.7 percent, respectively, over the past four years. During those same years, U.S. Treasury bills returned 3.8, 4.6, 4.8, and 4.0 percent, respectively. What is the variance of the risk premiums on Jefferson Mills stock for these four years?

Accepted Answer

A) .00298 
B) .00196 
C) .00396 
D) .00478 
E) .00528 
A) .00298 
B) .00196 
C) .00396 
D) .00478 
E) .00528

Question 8

You have owned a stock for seven years. The geometric average return on this investment for those seven years is positive even though the annual rates of return have varied significantly. Given this, you know the arithmetic average return for the period is:

Accepted Answer

A) positive but less than the geometric average return. 
B) less than the geometric return and could be negative, zero, or positive. 
C) equal to the geometric average return. 
D) either equal to or greater than the geometric average return. 
E) greater than the geometric average return. 
A) positive but less than the geometric average return. 
B) less than the geometric return and could be negative, zero, or positive. 
C) equal to the geometric average return. 
D) either equal to or greater than the geometric average return. 
E) greater than the geometric average return.

Question 9

Jack owned a stock for five months and earned an annualized rate of return of 6 percent. What was the holding period return?

Accepted Answer

A) 2.37% 
B) 2.42% 
C) 2.46% 
D) 2.64% 
E) 2.72% 
A) 2.37% 
B) 2.42% 
C) 2.46% 
D) 2.64% 
E) 2.72%

Question 10

Blackstone Mines stock returned 10.5, 17.2, −9.0, and 14.5 percent over the past four years, respectively. What is the geometric average return?

Accepted Answer

A) 5.84% 
B) 6.36% 
C) 7.78% 
D) 9.94% 
E) 10.33% 
A) 5.84% 
B) 6.36% 
C) 7.78% 
D) 9.94% 
E) 10.33%

Question 11

You purchased a stock for $30.43 a share, received a dividend of $.70 per share, and sold the stock after one year for $30.22 a share. What was your dividend yield on this investment?

Accepted Answer

A) 2.30% 
B) 2.38% 
C) 2.45% 
D) 2.67% 
E) 2.75% 
A) 2.30% 
B) 2.38% 
C) 2.45% 
D) 2.67% 
E) 2.75%

Question 12

Based on the period of 1926-2018, the risk premium for small-company stocks averaged:

Accepted Answer

A) 12.3% 
B) 12.8% 
C) 15.0% 
D) 16.8% 
E) 17.4% 
A) 12.3% 
B) 12.8% 
C) 15.0% 
D) 16.8% 
E) 17.4%

Question 13

Which one of the following should be used to compare the overall performance of three different investments?

Accepted Answer

A) holding period dollar return 
B) capital gains yield 
C) dividend yield 
D) holding period percentage return 
E) effective annual return 
A) holding period dollar return 
B) capital gains yield 
C) dividend yield 
D) holding period percentage return 
E) effective annual return

Question 14

You have been researching a company and have estimated that the firm's stock will sell for $44 a share one year from now. You also estimate the stock will have a dividend yield of 2.18 percent. How much are you willing to pay per share today to purchase this stock if you desire a total return of 15 percent on your investment?

Accepted Answer

A) $37.55 
B) $38.00 
C) $38.24 
D) $39.00 
E) $40.20 
A) $37.55 
B) $38.00 
C) $38.24 
D) $39.00 
E) $40.20

Question 15

One year ago, you purchased 500 shares of stock at a cost of $10,500. The stock paid an annual dividend of $1.10 per share. Today, you sold those shares for $23.90 each. What is the capital gains yield on this investment?

Accepted Answer

A) 9.96% 
B) 10.52% 
C) 12.49% 
D) 13.81% 
E) 14.75% 
A) 9.96% 
B) 10.52% 
C) 12.49% 
D) 13.81% 
E) 14.75%

Question 16

A stock had year-end prices of $24, $27, $32, and $26 over the past four years, respectively. What is the geometric average return?

Accepted Answer

A) 2.02% 
B) 2.18% 
C) 2.55% 
D) 2.70% 
E) 2.81% 
A) 2.02% 
B) 2.18% 
C) 2.55% 
D) 2.70% 
E) 2.81%

Question 17

The standard deviation is a measure of:

Accepted Answer

A) volatility. 
B) total return. 
C) capital gains. 
D) changes in dividend yields. 
E) changes in the capital gains rate. 
A) volatility. 
B) total return. 
C) capital gains. 
D) changes in dividend yields. 
E) changes in the capital gains rate.

Question 18

Over the past ten years, large-company stocks have returned an average of 8.7 percent annually, long-term corporate bonds have earned 4.1 percent annually, and U.S. Treasury bills have returned 2.5 percent annually. How much additional risk premium would you have earned if you had invested in large-company stocks rather than long-term corporate bonds over those ten years?

Accepted Answer

A) 1.7% 
B) 3.7% 
C) 4.2% 
D) 4.6% 
E) 6.4% 
A) 1.7% 
B) 3.7% 
C) 4.2% 
D) 4.6% 
E) 6.4%

Question 19

A single common stock share was purchased for $50.00 at the beginning of the year. The end of year stock price was $49.35. What was the amount of the annual dividend if the total return for the year was 2.3 percent?

Accepted Answer

A) $1.25 per share 
B) $1.40 per share 
C) $1.60 per share 
D) $1.80 per share 
E) $2.20 per share 
A) $1.25 per share 
B) $1.40 per share 
C) $1.60 per share 
D) $1.80 per share 
E) $2.20 per share

Question 20

When the total return on an investment is expressed on a per-year basis it is called the:

Accepted Answer

A) capital gains yield. 
B) dividend yield. 
C) holding period return. 
D) effective annual return. 
E) initial return. 
A) capital gains yield. 
B) dividend yield. 
C) holding period return. 
D) effective annual return. 
E) initial return.

The average risk premium on large-company stocks for the period 1926-2018 was:

One year ago, you purchased 200 shares of Southern Foods common stock for $39.50 a share. Today, you sold your shares for $35.40 a share. During this past year, the stock paid $1.36 in dividends per share. What is your dividend yield on this investment?

A stock has an average historical return of 10.7 percent and a standard deviation of 19.3 percent. Which range of returns would you expect to see approximately two-thirds of the time?

The risk premium is defined as the rate of return on:

Over the past four years, a stock produced returns of 13, 6, −5, and 18 percent, respectively. What is the standard deviation of these returns?

A frequency distribution, which is completely defined by its average (mean)and variance or standard deviation, is referred to as a(n):

You have owned a stock for seven years. The geometric average return on this investment for those seven years is positive even though the annual rates of return have varied significantly. Given this, you know the arithmetic average return for the period is:

Jack owned a stock for five months and earned an annualized rate of return of 6 percent. What was the holding period return?

Blackstone Mines stock returned 10.5, 17.2, −9.0, and 14.5 percent over the past four years, respectively. What is the geometric average return?

You purchased a stock for $30.43 a share, received a dividend of $.70 per share, and sold the stock after one year for $30.22 a share. What was your dividend yield on this investment?

Based on the period of 1926-2018, the risk premium for small-company stocks averaged:

Which one of the following should be used to compare the overall performance of three different investments?

One year ago, you purchased 500 shares of stock at a cost of $10,500. The stock paid an annual dividend of $1.10 per share. Today, you sold those shares for $23.90 each. What is the capital gains yield on this investment?

A stock had year-end prices of $24, $27, $32, and $26 over the past four years, respectively. What is the geometric average return?

The standard deviation is a measure of:

A single common stock share was purchased for $50.00 at the beginning of the year. The end of year stock price was $49.35. What was the amount of the annual dividend if the total return for the year was 2.3 percent?

When the total return on an investment is expressed on a per-year basis it is called the:

The Investment Process

Overview of Security Tips

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Alternative Investments

Corporate and Government Bonds

Projecting Cash Flow and Earnings

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Exam 1: A Brief History of Risk and Return

The average risk premium on large-company stocks for the period 1926-2018 was:

One year ago, you purchased 200 shares of Southern Foods common stock for $39.50 a share. Today, you sold your shares for $35.40 a share. During this past year, the stock paid $1.36 in dividends per share. What is your dividend yield on this investment?

A stock has an average historical return of 10.7 percent and a standard deviation of 19.3 percent. Which range of returns would you expect to see approximately two-thirds of the time?

The risk premium is defined as the rate of return on:

Over the past four years, a stock produced returns of 13, 6, −5, and 18 percent, respectively. What is the standard deviation of these returns?

A frequency distribution, which is completely defined by its average (mean)and variance or standard deviation, is referred to as a(n):

You have owned a stock for seven years. The geometric average return on this investment for those seven years is positive even though the annual rates of return have varied significantly. Given this, you know the arithmetic average return for the period is:

Jack owned a stock for five months and earned an annualized rate of return of 6 percent. What was the holding period return?

Blackstone Mines stock returned 10.5, 17.2, −9.0, and 14.5 percent over the past four years, respectively. What is the geometric average return?

You purchased a stock for $30.43 a share, received a dividend of $.70 per share, and sold the stock after one year for $30.22 a share. What was your dividend yield on this investment?

Based on the period of 1926-2018, the risk premium for small-company stocks averaged:

Which one of the following should be used to compare the overall performance of three different investments?

One year ago, you purchased 500 shares of stock at a cost of $10,500. The stock paid an annual dividend of $1.10 per share. Today, you sold those shares for $23.90 each. What is the capital gains yield on this investment?

A stock had year-end prices of $24, $27, $32, and $26 over the past four years, respectively. What is the geometric average return?

The standard deviation is a measure of:

A single common stock share was purchased for $50.00 at the beginning of the year. The end of year stock price was $49.35. What was the amount of the annual dividend if the total return for the year was 2.3 percent?

When the total return on an investment is expressed on a per-year basis it is called the:

The Investment Process

Overview of Security Tips

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Alternative Investments

Corporate and Government Bonds

Projecting Cash Flow and Earnings

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters