Exam 11: Risk and Return in Capital Markets

Ford Motor Company had realized returns of 15%, 30%, -15%, and -30% over four quarters. What is the quarterly standard deviation of returns for Ford?

Which of the following statements is FALSE?

The S&P 500 index delivered a return of 20%, -10%, 20%, and 5% over four successive years. What is the arithmetic average annual return for four years?

You own shares in Supernova Inc. that were purchased at a price of $23 per share. Quicksilver Inc. has offered to purchase Supernova Inc. and buy your shares at a price of $34 per share. What will be your return if you tender your shares to Quicksilver Inc. and the deal is completed?

What are the two components of realized return from a stock investment?

Is volatility a reasonable measure of risk when evaluating large portfolios?

You purchased Alpha Innovative Inc. stock at a price of $25 per share. Its price was $15 after six months and the company declared bankruptcy at the end of the next six months. The realized return over the last year is ________.

Suppose the quarterly arithmetic average return for a stock is 10% per quarter and the stock gives a return of 15% each over the next two quarters. The arithmetic average return over the six quarters is ________.

Is volatility a reasonable measure of risk when evaluating the investment in a single stock?

Amazon.com stock prices gave a realized return of 5%, -5%, 11%, and -11% over four successive quarters. What is the annual realized return for Amazon.com for the year?

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

If the Federal Reserve were to change from an expansionary to a contractionary monetary policy, this would be an example of ________.

There is an overall relationship between ________ and ________. Larger stocks have a lower volatility overall.

The geometric average annual return for a large capitalization stock portfolio is 10% for ten years and 6% per year for the next five years. The geometric average annual return for the entire 15 year period is ________.

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

Which of the following is NOT a systematic risk?

The risk premium of a security is determined by its ________ risk and does not depend on its ________ risk.

The excess return is the difference between the average return on a security and the average return for ________.

In general, it is possible to eliminate ________ risk by holding a large portfolio of assets.

If the returns on a stock index can be characterized by a normal distribution with mean 12%, the probability that returns will be lower than 12% over the next period equals ________.