Question 1

Annual percentage rates (APRs) are computed using

Accepted Answer

A) simple interest. 
B) compound interest. 
C) either simple interest or compound interest. 
D) best estimates of expected real costs. 
E) None of the options 
A) simple interest. 
B) compound interest. 
C) either simple interest or compound interest. 
D) best estimates of expected real costs. 
E) None of the options

Question 2

Discuss the historical distributions of each of the following in terms of their average return and the dispersion of their returns: U.S.small company stocks, U.S.large company stocks, and U.S.long-term government bonds.Would any of these investments cause a loss in purchasing power during a 1926-2009 holding period

Accepted Answer

The data is given in Table 5.3. @#IMG-DLM& Whether

Question 3

You have been given this probability distribution for the holding-period return for GM stock:   What is the expected variance for GM stock

Accepted Answer

A) 200.00% 
B) 221.04% 
C) 246.37% 
D) 14.87% 
E) 16.13% 
A) 200.00% 
B) 221.04% 
C) 246.37% 
D) 14.87% 
E) 16.13%

Question 4

Over the past year you earned a nominal rate of interest of 12.5% on your money.The inflation rate was 2.6% over the same period.The exact actual growth rate of your purchasing power was

Accepted Answer

A) 9.15%. 
B) 9.90%. 
C) 9.65%. 
D) 10.52%. 
A) 9.15%. 
B) 9.90%. 
C) 9.65%. 
D) 10.52%.

Question 5

A year ago, you invested $12,000 in an investment that produced a return of 18%.What is your approximate annual real rate of return if the rate of inflation was 2% over the year

Accepted Answer

A) 18% 
B) 2% 
C) 16% 
D) 15% 
A) 18% 
B) 2% 
C) 16% 
D) 15%

Question 6

You have been given this probability distribution for the holding-period return for GM stock:   What is the expected standard deviation for GM stock

Accepted Answer

A) 16.91% 
B) 16.13% 
C) 13.79% 
D) 15.25% 
E) 14.87% 
A) 16.91% 
B) 16.13% 
C) 13.79% 
D) 15.25% 
E) 14.87%

Question 7

You have been given this probability distribution for the holding-period return for Cheese, Inc.stock:   Assuming that the expected return on Cheese's stock is 14.35%, what is the standard deviation of these returns

Accepted Answer

A) 4.72% 
B) 6.30% 
C) 4.38% 
D) 5.74% 
E) None of the options 
A) 4.72% 
B) 6.30% 
C) 4.38% 
D) 5.74% 
E) None of the options

Question 8

If the annual real rate of interest is 3.5% and the expected inflation rate is 2.5%, the nominal rate of interest would be approximately

Accepted Answer

A) 3.5%. 
B) 2.5%. 
C) 1%. 
D) 6.8%. 
E) None of the options 
A) 3.5%. 
B) 2.5%. 
C) 1%. 
D) 6.8%. 
E) None of the options

Question 9

You purchased a share of stock for $65.One year later you received $2.37 as a dividend and sold the share for $63.What was your holding-period return

Accepted Answer

A) 0.57% 
B) -0.2550% 
C) -0.89% 
D) 1.63% 
E) None of the options 
A) 0.57% 
B) -0.2550% 
C) -0.89% 
D) 1.63% 
E) None of the options

Question 10

If an investment provides a 1.25% return quarterly, its effective annual rate is

Accepted Answer

A) 5.23%. 
B) 5.09%. 
C) 4.02%. 
D) 4.04%. 
A) 5.23%. 
B) 5.09%. 
C) 4.02%. 
D) 4.04%.

Question 11

A year ago, you invested $1,000 in a savings account that pays an annual interest rate of 6%.What is your approximate annual real rate of return if the rate of inflation was 2% over the year

Accepted Answer

A) 4% 
B) 2% 
C) 6% 
D) 3% 
A) 4% 
B) 2% 
C) 6% 
D) 3%

Question 12

Over the past year you earned a nominal rate of interest of 8% on your money.The inflation rate was 3.5% over the same period.The exact actual growth rate of your purchasing power was

Accepted Answer

A) 15.55%. 
B) 4.35%. 
C) 5.02%. 
D) 4.81%. 
E) 15.04%. 
A) 15.55%. 
B) 4.35%. 
C) 5.02%. 
D) 4.81%. 
E) 15.04%.

Question 13

You purchased a share of stock for $68.One year later you received $3.00 as a dividend and sold the share for $74.50.What was your holding-period return

Accepted Answer

A) 12.5% 
B) 14.0% 
C) 13.6% 
D) 11.8% 
A) 12.5% 
B) 14.0% 
C) 13.6% 
D) 11.8%

Question 14

Kurtosis is a measure of

Accepted Answer

A) how fat the tails of a distribution are. 
B) the downside risk of a distribution. 
C) the normality of a distribution. 
D) the dividend yield of the distribution. 
E) how fat the tails of a distribution are and the normality of a distribution. 
A) how fat the tails of a distribution are. 
B) the downside risk of a distribution. 
C) the normality of a distribution. 
D) the dividend yield of the distribution. 
E) how fat the tails of a distribution are and the normality of a distribution.

Question 15

An investor purchased a bond 63 days ago for $980.He received $17 in interest and sold the bond for $987.What is the holding-period return on his investment

Accepted Answer

A) 1.52% 
B) 2.45% 
C) 1.92% 
D) 2.68% 
A) 1.52% 
B) 2.45% 
C) 1.92% 
D) 2.68%

Question 16

You purchase a share of Boeing stock for $90.One year later, after receiving a dividend of $3, you sell the stock for $92.What was your holding-period return

Accepted Answer

A) 4.44% 
B) 2.22% 
C) 3.33% 
D) 5.56% 
E) None of the options 
A) 4.44% 
B) 2.22% 
C) 3.33% 
D) 5.56% 
E) None of the options

Question 17

When a distribution is positively skewed,

Accepted Answer

A) standard deviation overestimates risk. 
B) standard deviation correctly estimates risk. 
C) standard deviation underestimates risk. 
D) the tails are fatter than in a normal distribution. 
A) standard deviation overestimates risk. 
B) standard deviation correctly estimates risk. 
C) standard deviation underestimates risk. 
D) the tails are fatter than in a normal distribution.

Question 18

You have been given this probability distribution for the holding-period return for a stock:   What is the expected holding-period return for the stock

Accepted Answer

A) 11.67% 
B) 8.33% 
C) 9.56% 
D) 12.4% 
E) None of the options 
A) 11.67% 
B) 8.33% 
C) 9.56% 
D) 12.4% 
E) None of the options

Question 19

The holding-period return (HPR) on a share of stock is equal to

Accepted Answer

A) the capital gain yield during the period, plus the inflation rate. 
B) the capital gain yield during the period, plus the dividend yield. 
C) the current yield, plus the dividend yield. 
D) the dividend yield, plus the risk premium. 
E) the change in stock price. 
A) the capital gain yield during the period, plus the inflation rate. 
B) the capital gain yield during the period, plus the dividend yield. 
C) the current yield, plus the dividend yield. 
D) the dividend yield, plus the risk premium. 
E) the change in stock price.

Question 20

You have been given this probability distribution for the holding-period return for KMP stock:   What is the expected standard deviation for KMP stock

Accepted Answer

A) 6.91% 
B) 8.13% 
C) 7.79% 
D) 7.25% 
E) 8.85% 
A) 6.91% 
B) 8.13% 
C) 7.79% 
D) 7.25% 
E) 8.85%

Exam 5: Risk, Return, and the Historical Record

Annual percentage rates (APRs) are computed using

You have been given this probability distribution for the holding-period return for GM stock: What is the expected variance for GM stock

Over the past year you earned a nominal rate of interest of 12.5% on your money.The inflation rate was 2.6% over the same period.The exact actual growth rate of your purchasing power was

A year ago, you invested $12,000 in an investment that produced a return of 18%.What is your approximate annual real rate of return if the rate of inflation was 2% over the year

You have been given this probability distribution for the holding-period return for GM stock: What is the expected standard deviation for GM stock

You have been given this probability distribution for the holding-period return for Cheese, Inc.stock: Assuming that the expected return on Cheese's stock is 14.35%, what is the standard deviation of these returns

If the annual real rate of interest is 3.5% and the expected inflation rate is 2.5%, the nominal rate of interest would be approximately

You purchased a share of stock for $65.One year later you received $2.37 as a dividend and sold the share for $63.What was your holding-period return

If an investment provides a 1.25% return quarterly, its effective annual rate is

A year ago, you invested $1,000 in a savings account that pays an annual interest rate of 6%.What is your approximate annual real rate of return if the rate of inflation was 2% over the year

Over the past year you earned a nominal rate of interest of 8% on your money.The inflation rate was 3.5% over the same period.The exact actual growth rate of your purchasing power was

You purchased a share of stock for $68.One year later you received $3.00 as a dividend and sold the share for $74.50.What was your holding-period return

Kurtosis is a measure of

An investor purchased a bond 63 days ago for $980.He received $17 in interest and sold the bond for $987.What is the holding-period return on his investment

You purchase a share of Boeing stock for $90.One year later, after receiving a dividend of $3, you sell the stock for $92.What was your holding-period return

When a distribution is positively skewed,

You have been given this probability distribution for the holding-period return for a stock: What is the expected holding-period return for the stock

The holding-period return (HPR) on a share of stock is equal to

You have been given this probability distribution for the holding-period return for KMP stock: What is the expected standard deviation for KMP stock

The Investment Environment

Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

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