Exam 10: Risk and Return in Capital Markets

Suppose you invested $45 in TD Bank one month ago.It paid a dividend of $0.60,and you sold it right after the dividend was paid for $44.90.What was your dividend yield and capital gains yield on the investment?

Rational investors may be willing to choose an investment that has additional risk but does not offer additional reward.

The geometric average annual return for a large capitalization stock portfolio is 12% for ten years and 5% per year for the next five years.The geometric average annual return for the entire 15-year period is:

Stocks have both diversifiable risk and undiversifiable risk,but only diversifiable risk is rewarded with higher expected returns.

Use the table for the question(s)below. Consider the following average annual returns: -What is the risk premium for corporate bonds?

You purchased Enron stock at a price of $30 per share.Its price was $20 after six months and the company declared bankruptcy at the end of the next six months.The realized return over the last year is:

Which of the following statements is TRUE?

When looking at investment portfolios historically,was there a pattern between returns and volatility?

Explain why investors do not receive a risk premium for exposure to unsystematic risk.

The S&P TSX Composite index delivered annual returns of 10.55%,-8.32%,21.08% and 9.10% from 2014 to 2017.What is the standard deviation of the index returns over these four years?

What is the difference between systematic and unsystematic risk?

The S&P TSX Composite index delivered annual returns of 10.55%,-8.32%,21.08% and 9.10% from 2014 to 2017.What was the average compound annual return per year?

Use the table for the question(s)below. Consider the following average annual returns: -What is the risk premium for the portfolio of small stocks?

Use the table for the question(s)below. Consider the following realized annual returns: -The average annual return over the period 1926-2009 for small stocks is 22.1%,and the standard deviation of returns is 22.1%.Based on these numbers,what is a 95% confidence interval for 2010 returns?

Use the table for the question(s)below. Consider the following realized annual returns: -The average annual return over the period 1926-2009 for the S&P 500 is 11.7%,and the standard deviation of returns is 20.5%.Based on these numbers,what is a 67% confidence interval for 2010 returns?

Use the table for the question(s)below. Consider the following price and dividend data for Ford Motor Company: -Assume that you purchased Ford Motor Company stock at the closing price on December 31,2004 and sold it after the dividend had been paid at the closing price on January 26,2005.Your dividend yield for this period is closest to:

Treasury bill returns are 5%,4%,3%,and 6% over four years.The standard deviation of returns of Treasury bills is:

The probability mass between two standard deviations around the mean for a normal distribution is:

Why must riskier investments offer higher expected returns?

Independent risks can be diversified by holding a large number of uncorrelated assets with independent risks.