Exam 1: A Brief History of Risk and Return

The wider the distribution of an investment's returns over time, the ________ the expected average rate of return and the ________ the expected volatility of those returns.

Over the past five years, Southwest Railway stock had annual returns of 10, 14, −6, 7.5, and 16 percent, respectively. What is the variance of these returns?

The rate of return earned on a U.S. Treasury bill is frequently used as a proxy for the:

Assume you own a portfolio that is invested 50 percent in large-company stocks and 50 percent in corporate bonds. If you want to increase the potential annual return on this portfolio, you could:

Over the past four years, the common stock of Jess Electronics Co. produced annual returns of 7.2, 5.8, 11.2, and 13.6 percent, respectively. Treasury bills produced returns of 3.4, 3.3, 4.1, and 4.0 percent, respectively over the same period. What is the standard deviation of the risk premium on Jess Electronics Co. stock for this time period?

Today, you sold 800 shares of DeSoto, Inc., for $55.50 a share. You bought the shares one year ago at a price of $60.02 a share. Over the year, you received a total of $500 in dividends. What is your capital gains yield on this investment?

Eileen just sold a stock and realized a 6.25 percent return for a 7-month holding period. What was her annualized rate of return?

The arithmetic average return is the:

You purchased a stock for $35.00 a share and resold it one year later. Your total return for the year was 7.5 percent and the dividend yield was 1.4 percent. At what price did you resell the stock?

Todd purchased 600 shares of stock at a price of $68.20 a share and received a dividend of $1.42 per share. After six months, he resold the stock for $71.30 a share. What was his total dollar return?

An asset had annual returns of 17, −35, −18, 24, and 6 percent, respectively, over the past five years. What is the arithmetic average return?

John began his investing program with a $5,500 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 \ 5,500 8.5\% 1 \ 2,000 -5.0\% 2 \ 2,600 4.5\% 3 \ 3,000 9.0\% 4 \ 900 -2.5\%

Jeremy owns a stock that has historically returned 7.5 percent annually with a standard deviation of 10.2 percent. There is only a .5 percent chance that the stock will produce a return greater than ________ percent in any one year.

Over the past four years, Jellystone Quarry stock produced returns of 12.5, 15.1, 8.7, and 2.6 percent, respectively. For the same time period, the risk-free rate 4.7, 5.3, 3.9, and 3.4 percent each year, respectively. What is the arithmetic average risk premium on this stock during these four years?

You own a stock that has produced an arithmetic average return of 5.6 percent over the past five years. The annual returns for the first four years were 15, 10, −18, and 8 percent, respectively. What was the rate of return on the stock in year five?

You purchased a stock for $50.00 a share and resold it one year later. Your total return for the year was 11.5 percent and the dividend yield was 2.8 percent. At what price did you resell the stock?

An asset had annual returns of 13, 10, −14, 3, and 36 percent, respectively, for the past five years. What is the standard deviation of these returns?

One year ago, you purchased 400 shares of Southern Cotton at $36.20 a share. During the past year, you received a total of $250 in dividends. Today, you sold your shares for $38.50 a share. What is your total return on this investment?

Which one of the following had the highest average return for the period 1926-2018?

Which one of the following had the smallest standard deviation of returns for the period 1926-2018?