Question 1

Past performance

Accepted Answer

A) does not guarantee future performance. 
B) is totally unrelated to future performance. 
C) guarantees future performance. 
D) is a perfect representation of future performance for the same length of time. 
E) will be duplicated in the near future. 
A) does not guarantee future performance. 
B) is totally unrelated to future performance. 
C) guarantees future performance. 
D) is a perfect representation of future performance for the same length of time. 
E) will be duplicated in the near future.

Question 2

A review of annualized equity risk premiums by country for the period 1900 to 2010 shows that

Accepted Answer

A) country with the lowest standard deviation had the lowest equity risk premium. 
B) the standard deviation of returns was consistent among countries. 
C) the sharpe ratio for each country is equal. 
D) the United States had the highest risk premium of the countries listed. 
E) Sharpe ratios vary significantly among countries. 
A) country with the lowest standard deviation had the lowest equity risk premium. 
B) the standard deviation of returns was consistent among countries. 
C) the sharpe ratio for each country is equal. 
D) the United States had the highest risk premium of the countries listed. 
E) Sharpe ratios vary significantly among countries.

Question 3

Winter's just declared an increase in its annual dividend from $.82 a share to $.85 a share.If the stock price should remain constant,then

Accepted Answer

A) the capital gains yield would decrease. 
B) the capital gains yield would increase. 
C) the dividend yield would remain constant. 
D) the dividend yield would increase. 
E) neither the capital gains yield nor the dividend yield would change. 
A) the capital gains yield would decrease. 
B) the capital gains yield would increase. 
C) the dividend yield would remain constant. 
D) the dividend yield would increase. 
E) neither the capital gains yield nor the dividend yield would change.

Question 4

One year ago,Barkley's stock sold for $28 a share.During last year,Barkley's paid $1.23 per share in dividends and saw its stock price increase by 7 percent for the year.Today,the firm announced that it will pay $1.30 per share in dividends this year.What do you know with certainty about the performance of Barkley's stock for this year?

Accepted Answer

A) The total rate of return will be higher this year than it was last year. 
B) The dividend yield for this year will be higher than it was last year. 
C) The capital gains yield will be positive. 
D) The dividend yield for this year will be lower than it was last year. 
E) The total rate of return will be lower this year than it was last year. 
A) The total rate of return will be higher this year than it was last year. 
B) The dividend yield for this year will be higher than it was last year. 
C) The capital gains yield will be positive. 
D) The dividend yield for this year will be lower than it was last year. 
E) The total rate of return will be lower this year than it was last year.

Question 5

The annual returns for KLO stock for the last three years are 7.4 percent,3.2 percent,and 17.8 percent.Assuming no dividends were paid,what was the 3-year holding period percentage return?

Accepted Answer

A) 28.40% 
B) 25.70% 
C) 31.40% 
D) 30.57% 
E) 36.52% 
A) 28.40% 
B) 25.70% 
C) 31.40% 
D) 30.57% 
E) 36.52%

Question 6

How is the Sharpe ratio defined as it applies to security returns?

Accepted Answer

A) Average return / Risk premium 
B) Standard deviation / Risk premium 
C) Average return / Standard deviation 
D) Risk premium / Average return 
E) Risk premium / Standard deviation 
A) Average return / Risk premium 
B) Standard deviation / Risk premium 
C) Average return / Standard deviation 
D) Risk premium / Average return 
E) Risk premium / Standard deviation

Question 7

Assume a $1 investment in a stock 23 years ago is now worth $28.82.What is the geometric average return for the period?

Accepted Answer

A) 13.52% 
B) 15.74% 
C) 22.08% 
D) 25.30% 
E) 19.03% 
A) 13.52% 
B) 15.74% 
C) 22.08% 
D) 25.30% 
E) 19.03%

Question 8

The average squared difference between the actual return and the average return is called the

Accepted Answer

A) excess return. 
B) variance. 
C) standard deviation. 
D) risk premium. 
E) volatility return. 
A) excess return. 
B) variance. 
C) standard deviation. 
D) risk premium. 
E) volatility return.

Question 9

A stock had returns of 8 percent,13 percent,and −3 percent for the past 3 years.Based on these returns,what is the approximate probability that this stock will earn at least 14.19 percent in any one given year?

Accepted Answer

A) 8)00% 
B) 2)28% 
C) 15.87% 
D) 4)56% 
E) 31.74% 
A) 8)00% 
B) 2)28% 
C) 15.87% 
D) 4)56% 
E) 31.74%

Question 10

A stock had returns of 11 percent,26 percent,8 percent,and −38 percent annually for the past 4 years.What is the mean and variance of these returns?

Accepted Answer

A) 1)75%;.057319 
B) 1)75%;.076425 
C) 3)50%;.057319 
D) 3)50%;.062833 
E) 3)50%;.076425 
A) 1)75%;.057319 
B) 1)75%;.076425 
C) 3)50%;.057319 
D) 3)50%;.062833 
E) 3)50%;.076425

Question 11

One year ago,Stacey purchased 200 shares of IXC stock at a price of $42.68 per share.The stock pays an annual dividend of $1.06 per share.Today,she sold all of her shares for $37.43 per share.What is her total dollar return on this investment?

Accepted Answer

A) −$703 
B) −$838 
C) $1,022 
D) $1,262 
E) −$1,050 
A) −$703 
B) −$838 
C) $1,022 
D) $1,262 
E) −$1,050

Question 12

Given a normal distribution,assume you want to earn a rate of return that plots more than three standard deviations above the mean.What is your probability of earning such a return in any one year?

Accepted Answer

A) .14 percent or less 
B) 0.15 to .25 percent 
C) .26 to .50 percent 
D) .51 to 1 percent 
E) More than 1 percent 
A) .14 percent or less 
B) 0.15 to .25 percent 
C) .26 to .50 percent 
D) .51 to 1 percent 
E) More than 1 percent

Question 13

Which set of characteristics should you prefer in a stock if you desire the highest (least negative)rate of return assuming that you will earn a negative total return for the period?

Accepted Answer

A) High-dividend,high standard deviation 
B) No dividend,high standard deviation 
C) High-dividend,low standard deviation 
D) Low-dividend,high standard deviation 
E) Low-dividend,low standard deviation 
A) High-dividend,high standard deviation 
B) No dividend,high standard deviation 
C) High-dividend,low standard deviation 
D) Low-dividend,high standard deviation 
E) Low-dividend,low standard deviation

Question 14

You are comparing the returns of two portfolios for a 10-year period.Portfolio I has a lower dispersion of returns and a higher average rate of return than Portfolio II.Given this,what do you know with certainty?

Accepted Answer

A) Portfolio I has a lower standard deviation than Portfolio II. 
B) Portfolio I is riskier than Portfolio II. 
C) Portfolio II has less total risk than Portfolio I. 
D) Portfolio I will outperform Portfolio II over the next 10 years. 
E) Portfolio II consists of more individual stocks than Portfolio I. 
A) Portfolio I has a lower standard deviation than Portfolio II. 
B) Portfolio I is riskier than Portfolio II. 
C) Portfolio II has less total risk than Portfolio I. 
D) Portfolio I will outperform Portfolio II over the next 10 years. 
E) Portfolio II consists of more individual stocks than Portfolio I.

Question 15

Which one of these statements correctly reflects historical history for the period 1926-2015?

Accepted Answer

A) U)S.Treasury bills had a negative rate of return during the Great Depression. 
B) The rate of return in any given year is a good estimate of the rate of return for the following year. 
C) For large-company stocks,both the worst and best annual rate of return occurred during the period 1930-35. 
D) The annual rate of return on U.S.Treasury bills never exceeded 8 percent. 
E) The maximum annual rate of return on large-company stocks was 33 percent. 
A) U)S.Treasury bills had a negative rate of return during the Great Depression. 
B) The rate of return in any given year is a good estimate of the rate of return for the following year. 
C) For large-company stocks,both the worst and best annual rate of return occurred during the period 1930-35. 
D) The annual rate of return on U.S.Treasury bills never exceeded 8 percent. 
E) The maximum annual rate of return on large-company stocks was 33 percent.

Question 16

The arithmetic average return on your portfolio for the past 5 years is 9.3 percent.You earned −7.4 percent,17.1 percent,6.3 percent,and 11.8 percent for 4 of those 5 years.What rate of return did you earn in the fifth year?

Accepted Answer

A) 18.7% 
B) 16.0% 
C) 13.2% 
D) 19.6% 
E) 17.5% 
A) 18.7% 
B) 16.0% 
C) 13.2% 
D) 19.6% 
E) 17.5%

Question 17

A stock had returns of 22 percent,1 percent,−27 percent,19 percent,and 7 percent annually for the past 5 years.Based on these returns,what is the approximate probability that this stock will earn at least 60 percent in any one given year?

Accepted Answer

A) almost 0% 
B) slightly more than 2.28% 
C) slightly more than 0.13% 
D) slightly less than 2.28% 
E) slightly less than 0.13% 
A) almost 0% 
B) slightly more than 2.28% 
C) slightly more than 0.13% 
D) slightly less than 2.28% 
E) slightly less than 0.13%

Question 18

The return earned in a typical year over a multiyear period is called the ________ average return.

Accepted Answer

A) arithmetic 
B) standard 
C) variant 
D) geometric 
E) real 
A) arithmetic 
B) standard 
C) variant 
D) geometric 
E) real

Question 19

A symmetric,bell-shaped frequency distribution that is completely defined by its mean and standard deviation is the ________ distribution.

Accepted Answer

A) gamma 
B) Poisson 
C) bimodal 
D) normal 
E) uniform 
A) gamma 
B) Poisson 
C) bimodal 
D) normal 
E) uniform

Question 20

Assume today is December 31,2015.Approximately how long has it been since the annual rate of inflation as measured by the Consumer Price Index has been negative?

Accepted Answer

A) Less than 40 years 
B) Between 40 and 50 years 
C) Between 50 and 60 years 
D) Between 60 and 70 years 
E) More than 70 years 
A) Less than 40 years 
B) Between 40 and 50 years 
C) Between 50 and 60 years 
D) Between 60 and 70 years 
E) More than 70 years

Past performance

A review of annualized equity risk premiums by country for the period 1900 to 2010 shows that

Winter's just declared an increase in its annual dividend from $.82 a share to $.85 a share.If the stock price should remain constant,then

The annual returns for KLO stock for the last three years are 7.4 percent,3.2 percent,and 17.8 percent.Assuming no dividends were paid,what was the 3-year holding period percentage return?

How is the Sharpe ratio defined as it applies to security returns?

Assume a $1 investment in a stock 23 years ago is now worth $28.82.What is the geometric average return for the period?

The average squared difference between the actual return and the average return is called the

A stock had returns of 8 percent,13 percent,and −3 percent for the past 3 years.Based on these returns,what is the approximate probability that this stock will earn at least 14.19 percent in any one given year?

A stock had returns of 11 percent,26 percent,8 percent,and −38 percent annually for the past 4 years.What is the mean and variance of these returns?

One year ago,Stacey purchased 200 shares of IXC stock at a price of $42.68 per share.The stock pays an annual dividend of $1.06 per share.Today,she sold all of her shares for $37.43 per share.What is her total dollar return on this investment?

Given a normal distribution,assume you want to earn a rate of return that plots more than three standard deviations above the mean.What is your probability of earning such a return in any one year?

Which set of characteristics should you prefer in a stock if you desire the highest (least negative)rate of return assuming that you will earn a negative total return for the period?

You are comparing the returns of two portfolios for a 10-year period.Portfolio I has a lower dispersion of returns and a higher average rate of return than Portfolio II.Given this,what do you know with certainty?

Which one of these statements correctly reflects historical history for the period 1926-2015?

The arithmetic average return on your portfolio for the past 5 years is 9.3 percent.You earned −7.4 percent,17.1 percent,6.3 percent,and 11.8 percent for 4 of those 5 years.What rate of return did you earn in the fifth year?

A stock had returns of 22 percent,1 percent,−27 percent,19 percent,and 7 percent annually for the past 5 years.Based on these returns,what is the approximate probability that this stock will earn at least 60 percent in any one given year?

The return earned in a typical year over a multiyear period is called the ________ average return.

A symmetric,bell-shaped frequency distribution that is completely defined by its mean and standard deviation is the ________ distribution.

Assume today is December 31,2015.Approximately how long has it been since the annual rate of inflation as measured by the Consumer Price Index has been negative?

Introduction to Corporate Finance

Financial Statements AMCQ Cash Flow

Financial Statements Analysis Amcq Financial Models

Discounted Cash Flow Valuation

Interest Rates AMCQ Bomcq Valuation

Stock Valuation

Net Present Value AMCQ Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, AMCQ Capital Budgeting

Return Amcq Risk: the Capital Asset Pricing Model Capm

Risk, cost of Capital, AMCQ Valuation

Efficient Capital Markets Amcq Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividemcqs AMCQ Other Payouts

Options Amcq Corporate Finance

Short-Term Finance Amcq Planning

Raising Capital

International Corporate Finance

Mergers Amcq Acquisitions Web Only

Filters

Exam 10: Risk Amcq Return: Lessons From Market History

Past performance

A review of annualized equity risk premiums by country for the period 1900 to 2010 shows that

Winter's just declared an increase in its annual dividend from $.82 a share to $.85 a share.If the stock price should remain constant,then

The annual returns for KLO stock for the last three years are 7.4 percent,3.2 percent,and 17.8 percent.Assuming no dividends were paid,what was the 3-year holding period percentage return?

How is the Sharpe ratio defined as it applies to security returns?

Assume a $1 investment in a stock 23 years ago is now worth $28.82.What is the geometric average return for the period?

The average squared difference between the actual return and the average return is called the

A stock had returns of 8 percent,13 percent,and −3 percent for the past 3 years.Based on these returns,what is the approximate probability that this stock will earn at least 14.19 percent in any one given year?

A stock had returns of 11 percent,26 percent,8 percent,and −38 percent annually for the past 4 years.What is the mean and variance of these returns?

One year ago,Stacey purchased 200 shares of IXC stock at a price of $42.68 per share.The stock pays an annual dividend of $1.06 per share.Today,she sold all of her shares for $37.43 per share.What is her total dollar return on this investment?

Given a normal distribution,assume you want to earn a rate of return that plots more than three standard deviations above the mean.What is your probability of earning such a return in any one year?

Which set of characteristics should you prefer in a stock if you desire the highest (least negative)rate of return assuming that you will earn a negative total return for the period?

You are comparing the returns of two portfolios for a 10-year period.Portfolio I has a lower dispersion of returns and a higher average rate of return than Portfolio II.Given this,what do you know with certainty?

Which one of these statements correctly reflects historical history for the period 1926-2015?

The arithmetic average return on your portfolio for the past 5 years is 9.3 percent.You earned −7.4 percent,17.1 percent,6.3 percent,and 11.8 percent for 4 of those 5 years.What rate of return did you earn in the fifth year?

A stock had returns of 22 percent,1 percent,−27 percent,19 percent,and 7 percent annually for the past 5 years.Based on these returns,what is the approximate probability that this stock will earn at least 60 percent in any one given year?

The return earned in a typical year over a multiyear period is called the ________ average return.

A symmetric,bell-shaped frequency distribution that is completely defined by its mean and standard deviation is the ________ distribution.

Assume today is December 31,2015.Approximately how long has it been since the annual rate of inflation as measured by the Consumer Price Index has been negative?

Introduction to Corporate Finance

Financial Statements AMCQ Cash Flow

Financial Statements Analysis Amcq Financial Models

Discounted Cash Flow Valuation

Interest Rates AMCQ Bomcq Valuation

Stock Valuation

Net Present Value AMCQ Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, AMCQ Capital Budgeting

Return Amcq Risk: the Capital Asset Pricing Model Capm

Risk, cost of Capital, AMCQ Valuation

Efficient Capital Markets Amcq Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividemcqs AMCQ Other Payouts

Options Amcq Corporate Finance

Short-Term Finance Amcq Planning

Raising Capital

International Corporate Finance

Mergers Amcq Acquisitions Web Only

Filters