Question 1

Elise just sold a stock and realized a 6.2 percent return for a 4-month holding period.What was her annualized rate of return?

Accepted Answer

A) 11.98 percent 
B) 14.78 percent 
C) 19.78 percent 
D) 21.29 percent 
E) 27.20 percent 
A) 11.98 percent 
B) 14.78 percent 
C) 19.78 percent 
D) 21.29 percent 
E) 27.20 percent

Question 2

You purchased a stock eight months ago for $36 a share.Today,you sold that stock for $41.50 a share. The stock pays no dividends.What was your annualized rate of return?

Accepted Answer

A) 23.32 percent 
B) 24.77 percent 
C) 25.70 percent 
D) 26.03 percent 
E) 27.67 percent 
A) 23.32 percent 
B) 24.77 percent 
C) 25.70 percent 
D) 26.03 percent 
E) 27.67 percent

Question 3

Tom decides to begin investing some portion of his annual bonus,beginning this year with $6,000.In the first year he earns a 8% return and adds $3,000 to his investment.In the second his portfolio loses 4% but,sticking to his plan,he adds $1,000 to his portfolio.In this year his portfolio returns 2%.What is Tom's dollar-weighted average return on his investments?

Accepted Answer

A) 0.34 percent 
B) 1.20 percent 
C) 1.54 percent 
D) 2.23 percent 
E) 2.58 percent 
A) 0.34 percent 
B) 1.20 percent 
C) 1.54 percent 
D) 2.23 percent 
E) 2.58 percent

Question 4

Big Town Markets common stock returned 13.8,14.2,9.7,5.3,and 12.2 percent,respectively,over the past five years.What is the arithmetic average return?

Accepted Answer

A) 10.99 percent 
B) 11.04 percent 
C) 11.56 percent 
D) 12.20 percent 
E) 13.80 percent 
A) 10.99 percent 
B) 11.04 percent 
C) 11.56 percent 
D) 12.20 percent 
E) 13.80 percent

Question 5

The capital gains yield is equal to:

Accepted Answer

A) (Pt - Pt + 1 + Dt + 1)/Pt + 1. 
B) (Pt + 1 - Pt + Dt)/Pt. 
C) Dt + 1/Pt. 
D) (Pt + 1 - Pt)/Pt. 
E) (Pt + 1 - Pt)/Pt + 1. 
A) (Pt - Pt + 1 + Dt + 1)/Pt + 1. 
B) (Pt + 1 - Pt + Dt)/Pt. 
C) Dt + 1/Pt. 
D) (Pt + 1 - Pt)/Pt. 
E) (Pt + 1 - Pt)/Pt + 1.

Question 6

A stock had year end prices of $24,$27,$32,and $26 over the past four years,respectively.What is the geometric average return?

Accepted Answer

A) 2.02 percent 
B) 2.18 percent 
C) 2.55 percent 
D) 2.70 percent 
E) 2.81 percent 
A) 2.02 percent 
B) 2.18 percent 
C) 2.55 percent 
D) 2.70 percent 
E) 2.81 percent

Question 7

Which one of the following is considered the best method of comparing the returns on various-sized investments?

Accepted Answer

A) total dollar return 
B) real dollar return 
C) absolute dollar return 
D) percentage return 
E) variance return 
A) total dollar return 
B) real dollar return 
C) absolute dollar return 
D) percentage return 
E) variance return

Question 8

Assume you own a portfolio that is invested 50 percent in large-company stocks and 50 percent in corporate bonds.If you want to increase the potential annual return on this portfolio,you could:

Accepted Answer

A) decrease the investment in stocks and increase the investment in bonds. 
B) replace the corporate bonds with intermediate-term government bonds. 
C) replace the corporate bonds with Treasury bills. 
D) increase the standard deviation of the portfolio. 
E) reduce the expected volatility of the portfolio. 
A) decrease the investment in stocks and increase the investment in bonds. 
B) replace the corporate bonds with intermediate-term government bonds. 
C) replace the corporate bonds with Treasury bills. 
D) increase the standard deviation of the portfolio. 
E) reduce the expected volatility of the portfolio.

Question 9

Over the past five years,an investment produced annual returns of 16.5,21,-18,4,and 17 percent,respectively.What is the geometric average return?

Accepted Answer

A) 6.42 percent 
B) 7.06 percent 
C) 8.00 percent 
D) 15.60 percent 
E) 16.00 percent 
A) 6.42 percent 
B) 7.06 percent 
C) 8.00 percent 
D) 15.60 percent 
E) 16.00 percent

Question 10

Eight months ago,you purchased 300 shares of a non-dividend paying stock for $27 a share.Today,you sold those shares for $31.59 a share.What was your annualized rate of return on this investment?

Accepted Answer

A) 17.00 percent 
B) 21.45 percent 
C) 25.50 percent 
D) 26.55 percent 
E) 28.00 percent 
A) 17.00 percent 
B) 21.45 percent 
C) 25.50 percent 
D) 26.55 percent 
E) 28.00 percent

Question 11

Over the past four years,Jellystone Quarry stock produced returns of 12.5,15.1,8.7,and 2.6 percent,respectively.For the same time period,the risk-free rate 4.7,5.3,3.9,and 3.4 percent,respectively.What is the arithmetic average risk premium on this stock during these four years?

Accepted Answer

A) 5.13 percent 
B) 5.25 percent 
C) 5.40 percent 
D) 5.83 percent 
E) 5.97 percent 
A) 5.13 percent 
B) 5.25 percent 
C) 5.40 percent 
D) 5.83 percent 
E) 5.97 percent

Question 12

An asset had annual returns of 12,18,6,-9,and 5 percent,respectively,for the last five years. What is the variance of these returns?

Accepted Answer

A) .00810 
B) .01013 
C) .01065 
D) .02038 
E) .04052 
A) .00810 
B) .01013 
C) .01065 
D) .02038 
E) .04052

Question 13

The average compound return earned per year over a multi-year period when inflows and outflows are considered is called the:

Accepted Answer

A) total return. 
B) average capital gains yield. 
C) dollar-weighted average return. 
D) arithmetic average return. 
E) geometric average return. 
A) total return. 
B) average capital gains yield. 
C) dollar-weighted average return. 
D) arithmetic average return. 
E) geometric average return.

Question 14

Over the past five years,Southwest Railway stock had annual returns of 10,14,-6,7.5,and 16 percent,respectively.What is the variance of these returns?

Accepted Answer

A) .00548 
B) .00685 
C) .00770 
D) .01370 
E) .02740 
A) .00548 
B) .00685 
C) .00770 
D) .01370 
E) .02740

Question 15

Which one of the following had the highest average return for the period 1926-2012?

Accepted Answer

A) large-company stocks 
B) U.S. Treasury bills 
C) long-term government bonds 
D) small-company stocks 
E) long-term corporate bonds 
A) large-company stocks 
B) U.S. Treasury bills 
C) long-term government bonds 
D) small-company stocks 
E) long-term corporate bonds

Question 16

One year ago,you purchased 100 shares of Southern Foods common stock for $42.20 a share. Today,you sold your shares for $39.70 a share.During this past year,the stock paid $1.40 in dividends per share.What is your dividend yield on this investment?

Accepted Answer

A) 3.32 percent 
B) 3.37 percent 
C) 3.44 percent 
D) 3.53 percent 
E) 3.61 percent 
A) 3.32 percent 
B) 3.37 percent 
C) 3.44 percent 
D) 3.53 percent 
E) 3.61 percent

Question 17

An asset had annual returns of 17,-35,-18,24,and 6 percent,respectively,over the past five years.What is the arithmetic average return?

Accepted Answer

A) -1.2 percent 
B) 0.8 percent 
C) 1.2 percent 
D) 1.6 percent 
E) 2.3 percent 
A) -1.2 percent 
B) 0.8 percent 
C) 1.2 percent 
D) 1.6 percent 
E) 2.3 percent

Question 18

The total dollar return on a share of stock is defined as the:

Accepted Answer

A) change in the price of the stock over a period of time. 
B) dividend income divided by the beginning price per share. 
C) capital gain or loss plus any dividend income. 
D) change in the stock price divided by the original stock price. 
E) annual dividend income received. 
A) change in the price of the stock over a period of time. 
B) dividend income divided by the beginning price per share. 
C) capital gain or loss plus any dividend income. 
D) change in the stock price divided by the original stock price. 
E) annual dividend income received.

Question 19

Which one of the following had the greatest volatility of returns for the period 1926-2012?

Accepted Answer

A) large-company stocks 
B) U.S. Treasury bills 
C) long-term government bonds 
D) small-company stocks 
E) long-term corporate bonds 
A) large-company stocks 
B) U.S. Treasury bills 
C) long-term government bonds 
D) small-company stocks 
E) long-term corporate bonds

Question 20

RedStone Mines stock returned 7.5,15.3,-9.2,and 11.5 percent over the past four years,respectively.What is the geometric average return?

Accepted Answer

A) 5.84 percent 
B) 6.36 percent 
C) 7.75 percent 
D) 9.94 percent 
E) 10.33 percent 
A) 5.84 percent 
B) 6.36 percent 
C) 7.75 percent 
D) 9.94 percent 
E) 10.33 percent

Elise just sold a stock and realized a 6.2 percent return for a 4-month holding period.What was her annualized rate of return?

You purchased a stock eight months ago for $36 a share.Today,you sold that stock for $41.50 a share. The stock pays no dividends.What was your annualized rate of return?

Big Town Markets common stock returned 13.8,14.2,9.7,5.3,and 12.2 percent,respectively,over the past five years.What is the arithmetic average return?

The capital gains yield is equal to:

A stock had year end prices of $24,$27,$32,and $26 over the past four years,respectively.What is the geometric average return?

Which one of the following is considered the best method of comparing the returns on various-sized investments?

Assume you own a portfolio that is invested 50 percent in large-company stocks and 50 percent in corporate bonds.If you want to increase the potential annual return on this portfolio,you could:

Over the past five years,an investment produced annual returns of 16.5,21,-18,4,and 17 percent,respectively.What is the geometric average return?

Eight months ago,you purchased 300 shares of a non-dividend paying stock for $27 a share.Today,you sold those shares for $31.59 a share.What was your annualized rate of return on this investment?

Over the past four years,Jellystone Quarry stock produced returns of 12.5,15.1,8.7,and 2.6 percent,respectively.For the same time period,the risk-free rate 4.7,5.3,3.9,and 3.4 percent,respectively.What is the arithmetic average risk premium on this stock during these four years?

An asset had annual returns of 12,18,6,-9,and 5 percent,respectively,for the last five years. What is the variance of these returns?

The average compound return earned per year over a multi-year period when inflows and outflows are considered is called the:

Over the past five years,Southwest Railway stock had annual returns of 10,14,-6,7.5,and 16 percent,respectively.What is the variance of these returns?

Which one of the following had the highest average return for the period 1926-2012?

One year ago,you purchased 100 shares of Southern Foods common stock for $42.20 a share. Today,you sold your shares for $39.70 a share.During this past year,the stock paid $1.40 in dividends per share.What is your dividend yield on this investment?

An asset had annual returns of 17,-35,-18,24,and 6 percent,respectively,over the past five years.What is the arithmetic average return?

The total dollar return on a share of stock is defined as the:

Which one of the following had the greatest volatility of returns for the period 1926-2012?

RedStone Mines stock returned 7.5,15.3,-9.2,and 11.5 percent over the past four years,respectively.What is the geometric average return?

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

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Exam 1: A Brief History of Risk and Return

Elise just sold a stock and realized a 6.2 percent return for a 4-month holding period.What was her annualized rate of return?

You purchased a stock eight months ago for $36 a share.Today,you sold that stock for $41.50 a share. The stock pays no dividends.What was your annualized rate of return?

Big Town Markets common stock returned 13.8,14.2,9.7,5.3,and 12.2 percent,respectively,over the past five years.What is the arithmetic average return?

The capital gains yield is equal to:

A stock had year end prices of $24,$27,$32,and $26 over the past four years,respectively.What is the geometric average return?

Which one of the following is considered the best method of comparing the returns on various-sized investments?

Assume you own a portfolio that is invested 50 percent in large-company stocks and 50 percent in corporate bonds.If you want to increase the potential annual return on this portfolio,you could:

Over the past five years,an investment produced annual returns of 16.5,21,-18,4,and 17 percent,respectively.What is the geometric average return?

Eight months ago,you purchased 300 shares of a non-dividend paying stock for $27 a share.Today,you sold those shares for $31.59 a share.What was your annualized rate of return on this investment?

Over the past four years,Jellystone Quarry stock produced returns of 12.5,15.1,8.7,and 2.6 percent,respectively.For the same time period,the risk-free rate 4.7,5.3,3.9,and 3.4 percent,respectively.What is the arithmetic average risk premium on this stock during these four years?

An asset had annual returns of 12,18,6,-9,and 5 percent,respectively,for the last five years. What is the variance of these returns?

The average compound return earned per year over a multi-year period when inflows and outflows are considered is called the:

Over the past five years,Southwest Railway stock had annual returns of 10,14,-6,7.5,and 16 percent,respectively.What is the variance of these returns?

Which one of the following had the highest average return for the period 1926-2012?

One year ago,you purchased 100 shares of Southern Foods common stock for $42.20 a share. Today,you sold your shares for $39.70 a share.During this past year,the stock paid $1.40 in dividends per share.What is your dividend yield on this investment?

An asset had annual returns of 17,-35,-18,24,and 6 percent,respectively,over the past five years.What is the arithmetic average return?

The total dollar return on a share of stock is defined as the:

Which one of the following had the greatest volatility of returns for the period 1926-2012?

RedStone Mines stock returned 7.5,15.3,-9.2,and 11.5 percent over the past four years,respectively.What is the geometric average return?

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