Question 1

If you multiply the number of shares of outstanding stock for a firm by the price per share,you are computing the firm's:

Accepted Answer

A) equity ratio. 
B) total book value. 
C) market share. 
D) market capitalization. 
E) time value. 
A) equity ratio. 
B) total book value. 
C) market share. 
D) market capitalization. 
E) time value.

Question 2

Lisa owns a stock that has an average geometric return of 11.34 percent and an average arithmetic return of 11.51 percent over the past six years.What average annual rate of return should Lisa expect to earn over the next four years?

Accepted Answer

A) 11.38 percent 
B) 11.41 percent 
C) 11.44 percent 
D) 11.47 percent 
E) 11.51 percent 
A) 11.38 percent 
B) 11.41 percent 
C) 11.44 percent 
D) 11.47 percent 
E) 11.51 percent

Question 3

The dividend yield is defined as the annual dividend expressed as a percentage of the:

Accepted Answer

A) average stock price. 
B) initial stock price. 
C) ending stock price. 
D) total annual return. 
E) capital gain. 
A) average stock price. 
B) initial stock price. 
C) ending stock price. 
D) total annual return. 
E) capital gain.

Question 4

Jefferson Mills stock produced returns of 14.8,22.6,5.9,and 9.7 percent,respectively,over the past four years.During those same years,U.S.Treasury bills returned 3.8,4.6,4.8,and 4.0 percent,respectively,for the same time period.What is the variance of the risk premiums on Jefferson Mills stock for these four years?

Accepted Answer

A) .00298 
B) .00196 
C) .00396 
D) .00478 
E) .00528 
A) .00298 
B) .00196 
C) .00396 
D) .00478 
E) .00528

Question 5

The geometric mean return on large-company stocks for the 1926-2012 period:

Accepted Answer

A) is approximately equal to the arithmetic mean return plus one-half of the standard deviation. 
B) exceeds the arithmetic mean return. 
C) is approximately equal to the arithmetic mean return minus one-half of the standard deviation. 
D) is approximately equal to the arithmetic mean return plus one-half of the variance. 
E) is less than the arithmetic mean return. 
A) is approximately equal to the arithmetic mean return plus one-half of the standard deviation. 
B) exceeds the arithmetic mean return. 
C) is approximately equal to the arithmetic mean return minus one-half of the standard deviation. 
D) is approximately equal to the arithmetic mean return plus one-half of the variance. 
E) is less than the arithmetic mean return.

Question 6

An asset has an average historical rate of return of 13.2 percent and a variance of .00972196.What range of returns would you expect to see approximately two-thirds of the time?

Accepted Answer

A) -2.28 to +24.48 percent 
B) -6.52 to +32.92 percent 
C) -9.58 to +38.8 percent 
D) +3.34 to +23.06 percent 
E) +13.1 to +13.3 percent 
A) -2.28 to +24.48 percent 
B) -6.52 to +32.92 percent 
C) -9.58 to +38.8 percent 
D) +3.34 to +23.06 percent 
E) +13.1 to +13.3 percent

Question 7

An initial investment of $35,000 forty nine years ago is worth $1,533,913 today.What is the geometric average return on this investment?

Accepted Answer

A) 7.47 percent 
B) 8.02 percent 
C) 9.23 percent 
D) 10.47 percent 
E) 11.08 percent 
A) 7.47 percent 
B) 8.02 percent 
C) 9.23 percent 
D) 10.47 percent 
E) 11.08 percent

Question 8

One year ago,you purchased 300 shares of Southern Cotton at $32.60 a share.During the past year,you received a total of $280 in dividends.Today,you sold your shares for $35.80 a share. What is your total return on this investment?

Accepted Answer

A) 8.79 percent 
B) 9.64 percent 
C) 10.16 percent 
D) 11.64 percent 
E) 12.68 percent 
A) 8.79 percent 
B) 9.64 percent 
C) 10.16 percent 
D) 11.64 percent 
E) 12.68 percent

Question 9

A portfolio had an original value of $7,400 seven years ago.The current value of the portfolio is $11,898.What is the average geometric return on this portfolio?

Accepted Answer

A) 7.02 percent 
B) 7.47 percent 
C) 7.59 percent 
D) 7.67 percent 
E) 7.88 percent 
A) 7.02 percent 
B) 7.47 percent 
C) 7.59 percent 
D) 7.67 percent 
E) 7.88 percent

Question 10

Scott purchased 200 shares of Frozen Foods stock for $48 a share.Four months later,he received a dividend of $0.22 a share and also sold the shares for $42 each.What was his annualized rate of return on this investment?

Accepted Answer

A) -44.69 percent 
B) -40.14 percent 
C) -33.00 percent 
D) -31.95 percent 
E) -28.07 percent 
A) -44.69 percent 
B) -40.14 percent 
C) -33.00 percent 
D) -31.95 percent 
E) -28.07 percent

Question 11

Over the past ten years,large-company stocks have returned an average of 10.4 percent annually,long-term corporate bonds have earned 4.6 percent,and U.S.Treasury bills have returned 3.2 percent.How much additional risk premium would you have earned if you had invested in large-company stocks rather than long-term corporate bonds over those ten years?

Accepted Answer

A) 1.7 percent 
B) 3.7 percent 
C) 5.2 percent 
D) 5.8 percent 
E) 8.1 percent 
A) 1.7 percent 
B) 3.7 percent 
C) 5.2 percent 
D) 5.8 percent 
E) 8.1 percent

Question 12

An asset has an average annual historical return of 11.6 percent and a standard deviation of 17.8 percent.What range of returns would you expect to see 95 percent of the time?

Accepted Answer

A) -41.8 to +65.0 percent 
B) -34.4 to +53.6 percent 
C) -24.0 to +47.2 percent 
D) -6.2 to +29.4 percent 
E) -5.4 to +41.0 percent 
A) -41.8 to +65.0 percent 
B) -34.4 to +53.6 percent 
C) -24.0 to +47.2 percent 
D) -6.2 to +29.4 percent 
E) -5.4 to +41.0 percent

Question 13

When we refer to the rate of return on an investment,we are generally referring to the:

Accepted Answer

A) capital gains yield. 
B) effective annual rate of return. 
C) total percentage return. 
D) dividend yield. 
E) annualized dividend yield. 
A) capital gains yield. 
B) effective annual rate of return. 
C) total percentage return. 
D) dividend yield. 
E) annualized dividend yield.

Question 14

Capital gains are included in the return on an investment:

Accepted Answer

A) when either the investment is sold or the investment has been owned for at least one year. 
B) only if the investment is sold and the capital gain is realized. 
C) whenever dividends are paid. 
D) whether or not the investment is sold. 
E) only if the investment incurs a loss in value or is sold. 
A) when either the investment is sold or the investment has been owned for at least one year. 
B) only if the investment is sold and the capital gain is realized. 
C) whenever dividends are paid. 
D) whether or not the investment is sold. 
E) only if the investment incurs a loss in value or is sold.

Question 15

Celsius stock had year end prices of $42,$37,$44,and $46 over the past four years,respectively.What is the arithmetic average rate of return?

Accepted Answer

A) 3.17 percent 
B) 3.85 percent 
C) 4.28 percent 
D) 10.63 percent 
E) 11.79 percent 
A) 3.17 percent 
B) 3.85 percent 
C) 4.28 percent 
D) 10.63 percent 
E) 11.79 percent

Question 16

Over the past four years,a stock produced returns of 13,6,-5,and 18 percent,respectively. What is the standard deviation of these returns?

Accepted Answer

A) 8.63 percent 
B) 9.93 percent 
C) 9.97 percent 
D) 10.11 percent 
E) 10.15 percent 
A) 8.63 percent 
B) 9.93 percent 
C) 9.97 percent 
D) 10.11 percent 
E) 10.15 percent

Question 17

Today,you sold 800 shares of Sky High Inc.,for $57.60 a share.You bought the shares one year ago at a price of $61.20 a share.Over the year,you received a total of $500 in dividends.What is your capital gains yield on this investment?

Accepted Answer

A) -6.03 percent 
B) -5.88 percent 
C) -4.86 percent 
D) 6.25 percent 
E) 7.34 percent 
A) -6.03 percent 
B) -5.88 percent 
C) -4.86 percent 
D) 6.25 percent 
E) 7.34 percent

Question 18

Over the past four years,the common stock of JL Steel Co.produced annual returns of 6.2,5.8,11.2,and 13.6 percent,respectively.Treasury bills produced returns of 3.4,3.3,4.1,and 4.7 percent,respectively over the same period.What is the standard deviation of the risk premium on JL Steel Co.stock for this time period?

Accepted Answer

A) 2.23 percent 
B) 2.86 percent 
C) 3.22 percent 
D) 4.46 percent 
E) 4.61 percent 
A) 2.23 percent 
B) 2.86 percent 
C) 3.22 percent 
D) 4.46 percent 
E) 4.61 percent

Question 19

The average compound return earned per year over a multi-year period is called the:

Accepted Answer

A) total return 
B) average capital gains yield 
C) variance 
D) arithmetic average return 
E) geometric average return 
A) total return 
B) average capital gains yield 
C) variance 
D) arithmetic average return 
E) geometric average return

Question 20

Which one of the following statements is correct based on the historical returns for the period 1926-2012?

Accepted Answer

A) For the period, Treasury bills yielded a higher rate of return than long-term government bonds. 
B) The inflation rate exceeded the rate of return on Treasury bills during some years. 
C) Small-company stocks outperformed large-company stocks every year during the period. 
D) Bond prices, in general, were more volatile than stock prices. 
E) For the period, large-company stocks outperformed small-company stocks. 
A) For the period, Treasury bills yielded a higher rate of return than long-term government bonds. 
B) The inflation rate exceeded the rate of return on Treasury bills during some years. 
C) Small-company stocks outperformed large-company stocks every year during the period. 
D) Bond prices, in general, were more volatile than stock prices. 
E) For the period, large-company stocks outperformed small-company stocks.

If you multiply the number of shares of outstanding stock for a firm by the price per share,you are computing the firm's:

Lisa owns a stock that has an average geometric return of 11.34 percent and an average arithmetic return of 11.51 percent over the past six years.What average annual rate of return should Lisa expect to earn over the next four years?

The dividend yield is defined as the annual dividend expressed as a percentage of the:

The geometric mean return on large-company stocks for the 1926-2012 period:

An asset has an average historical rate of return of 13.2 percent and a variance of .00972196.What range of returns would you expect to see approximately two-thirds of the time?

An initial investment of $35,000 forty nine years ago is worth $1,533,913 today.What is the geometric average return on this investment?

One year ago,you purchased 300 shares of Southern Cotton at $32.60 a share.During the past year,you received a total of $280 in dividends.Today,you sold your shares for $35.80 a share. What is your total return on this investment?

A portfolio had an original value of $7,400 seven years ago.The current value of the portfolio is $11,898.What is the average geometric return on this portfolio?

Scott purchased 200 shares of Frozen Foods stock for $48 a share.Four months later,he received a dividend of $0.22 a share and also sold the shares for $42 each.What was his annualized rate of return on this investment?

An asset has an average annual historical return of 11.6 percent and a standard deviation of 17.8 percent.What range of returns would you expect to see 95 percent of the time?

When we refer to the rate of return on an investment,we are generally referring to the:

Capital gains are included in the return on an investment:

Celsius stock had year end prices of $42,$37,$44,and $46 over the past four years,respectively.What is the arithmetic average rate of return?

Over the past four years,a stock produced returns of 13,6,-5,and 18 percent,respectively. What is the standard deviation of these returns?

Today,you sold 800 shares of Sky High Inc.,for $57.60 a share.You bought the shares one year ago at a price of $61.20 a share.Over the year,you received a total of $500 in dividends.What is your capital gains yield on this investment?

The average compound return earned per year over a multi-year period is called the:

Which one of the following statements is correct based on the historical returns for the period 1926-2012?

The Investment Process

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Exam 1: A Brief History of Risk and Return

If you multiply the number of shares of outstanding stock for a firm by the price per share,you are computing the firm's:

Lisa owns a stock that has an average geometric return of 11.34 percent and an average arithmetic return of 11.51 percent over the past six years.What average annual rate of return should Lisa expect to earn over the next four years?

The dividend yield is defined as the annual dividend expressed as a percentage of the:

The geometric mean return on large-company stocks for the 1926-2012 period:

An asset has an average historical rate of return of 13.2 percent and a variance of .00972196.What range of returns would you expect to see approximately two-thirds of the time?

An initial investment of $35,000 forty nine years ago is worth $1,533,913 today.What is the geometric average return on this investment?

One year ago,you purchased 300 shares of Southern Cotton at $32.60 a share.During the past year,you received a total of $280 in dividends.Today,you sold your shares for $35.80 a share. What is your total return on this investment?

A portfolio had an original value of $7,400 seven years ago.The current value of the portfolio is $11,898.What is the average geometric return on this portfolio?

Scott purchased 200 shares of Frozen Foods stock for $48 a share.Four months later,he received a dividend of $0.22 a share and also sold the shares for $42 each.What was his annualized rate of return on this investment?

An asset has an average annual historical return of 11.6 percent and a standard deviation of 17.8 percent.What range of returns would you expect to see 95 percent of the time?

When we refer to the rate of return on an investment,we are generally referring to the:

Capital gains are included in the return on an investment:

Celsius stock had year end prices of $42,$37,$44,and $46 over the past four years,respectively.What is the arithmetic average rate of return?

Over the past four years,a stock produced returns of 13,6,-5,and 18 percent,respectively. What is the standard deviation of these returns?

Today,you sold 800 shares of Sky High Inc.,for $57.60 a share.You bought the shares one year ago at a price of $61.20 a share.Over the year,you received a total of $500 in dividends.What is your capital gains yield on this investment?

The average compound return earned per year over a multi-year period is called the:

Which one of the following statements is correct based on the historical returns for the period 1926-2012?

The Investment Process

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters