Exam 5: Risk, Return, and the Historical Record

A year ago, you invested $10,000 in a savings account that pays an annual interest rate of 5%.What is your approximate annual real rate of return if the rate of inflation was 3.5% over the year

Discuss some reasons why an investor with a longtime horizon might choose to invest in common stocks, even though they have historically been riskier than government bonds or T-bills.

Over the past year you earned a nominal rate of interest of 10% on your money.The inflation rate was 5% over the same period.The exact actual growth rate of your purchasing power was

When assessing tail risk by looking at the 5% worst-case scenario, the VaR is the

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

You purchase a share of CAT stock for $90.One year later, after receiving a dividend of $4, you sell the stock for $97.What was your holding-period return

________ is a risk measure that indicates vulnerability to extreme negative returns.

A year ago, you invested $1,000 in a savings account that pays an annual interest rate of 9%.What is your approximate annual real rate of return if the rate of inflation was 4% over the year

If the interest rate paid by borrowers and the interest rate received by savers accurately reflect the realized rate of inflation,

When assessing tail risk by looking at the 5% worst-case scenario, the most realistic view of downside exposure would be

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

Which of the following factors would not be expected to affect the nominal interest rate

When a distribution is negatively skewed,

The risk premium for common stocks

If a portfolio had a return of 12%, the risk-free asset return was 4%, and the standard deviation of the portfolio's excess returns was 25%, the Sharpe measure would be

Practitioners often use a ________% VaR, meaning that ________% of returns will exceed the VaR, and ________% will be worse.

If an investment provides a 0.78% return monthly, its effective annual rate is

Over the past year you earned a nominal rate of interest of 3.6% on your money.The inflation rate was 3.1% over the same period.The exact actual growth rate of your purchasing power was

An investment provides a 2% return semi-annually, its effective annual rate is

If a distribution has "fat tails," it exhibits