Exam 10: Risk and Return in Capital Markets

Use the table for the question(s) below. Consider the following realized annual returns: -The average annual return over the period 1926-2009 for the S&P 500 is 11.7%,and the standard deviation of returns is 20.5%.Based on these numbers,what is a 67% confidence interval for 2010 returns?

Why must riskier investments offer higher expected returns?

Lululemon Athletica stock had a realized return of 7%,-2%,-3%,and -8% over four successive quarters.What is your annual realized return if you bought Lululemon at the beginning of the year and sold it at the end of the year?

Use the table for the question(s) below. Consider the following average annual returns: -What is the risk premium for corporate bonds?

Use the table for the question(s) below. Consider the following realized annual returns: -The average annual return over the period 1926-2009 for small stocks is 22.1%,and the standard deviation of returns is 22.1%.Based on these numbers,what is a 95% confidence interval for 2010 returns?

Investors demand a higher return for investments that have larger fluctuations in values because

The geometric average annual return for a large capitalization stock portfolio is 12% for ten years and 5% per year for the next five years.The geometric average annual return for the entire 15-year period is:

Which of the following statements is true?

Rational investors may be willing to choose an investment that has additional risk but does not offer additional reward.

Use the table for the question(s) below. Consider the following price and dividend data for Ford Motor Company: -Assume that you purchased Ford Motor Company stock at the closing price on December 31,2004 and sold it after the dividend had been paid at the closing price on January 26,2005.Your dividend yield for this period is closest to:

Suppose you invested $33 in Pfizer one month ago.It paid a dividend of $0.88 and you sold it right after the dividend was paid for $31.14.What was your realized return from holding the stock?

Use the information for the question(s) below. Consider an economy with two types of firms, S and I. S firms always move together, but I firms move independently of each other. For both types of firms there is a 70% probability that the firm will have a 20% return and a 30% probability that the firm will have a -30% return. -The standard deviation for the return on an portfolio of 20 type S firms is closest to:

Use the table for the question(s) below. Consider the following average annual returns: -What is the risk premium for the S&P 500?

The standard deviation of returns of: I.small capitalization stocks is higher than that of large capitalization stocks. II) large capitalization stocks is lower than that of corporate bonds. III)corporate bonds is higher than that of Treasury bills. Which statement is true?

Use the information for the question(s) below. Consider an economy with two types of firms, S and I. S firms always move together, but I firms move independently of each other. For both types of firms there is a 70% probability that the firm will have a 20% return and a 30% probability that the firm will have a -30% return. -The standard deviation for the return on an individual firm is closest to:

Treasury bill returns are 5%,4%,3%,and 6% over four years.The standard deviation of returns of Treasury bills is:

Bombardier Inc had realized returns of -3%,-2%,-5%,and -7% over four quarters.What is the quarterly standard deviation of returns for Bombardier?

The probability mass between two standard deviations around the mean for a normal distribution is:

When investing for a long horizon,investors care about the volatility of ________ returns and not the volatility of ________ returns.

In Canada over the long term,small stocks on the S&P/TSX have provided the highest return followed by long-term Government of Canada bonds.