Question 1

The S&P 500 index delivered a return of 25%, 15%, -35%, and -5% over four successive years. What is the arithmetic average annual return for four years?

Accepted Answer

A)  -5% 
B)  0% 
C)  5% 
D)  3% 
A)  -5% 
B)  0% 
C)  5% 
D)  3%

Question 2

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 ________.

Accepted Answer

A)  50% 
B)  25% 
C)  46% 
D)  33% 
A)  50% 
B)  25% 
C)  46% 
D)  33%

Question 3

A company's stock price dropped when it announced that its revenue had decreased because of the quality issues of its products. This is an example of ________.

Accepted Answer

A)  market risk 
B)  unsystematic risk 
C)  systematic risk 
D)  undiversifiable risk 
A)  market risk 
B)  unsystematic risk 
C)  systematic risk 
D)  undiversifiable risk

Question 4

Which of the following investments had the largest fluctuations overall return over the past eighty years?

Accepted Answer

A)  small stocks 
B)  S&P 500 
C)  corporate bonds 
D)  Treasury bills 
A)  small stocks 
B)  S&P 500 
C)  corporate bonds 
D)  Treasury bills

Question 5

Which of the following statements is TRUE?

Accepted Answer

A)  On average, smaller stocks have lower volatility than Treasury bills. 
B)  Portfolios of smaller stocks are typically less volatile than individual small stocks. 
C)  On average, smaller stocks have lower returns than larger stocks. 
D)  On average, Treasury bills have higher returns than stocks. 
A)  On average, smaller stocks have lower volatility than Treasury bills. 
B)  Portfolios of smaller stocks are typically less volatile than individual small stocks. 
C)  On average, smaller stocks have lower returns than larger stocks. 
D)  On average, Treasury bills have higher returns than stocks.

Question 6

Which of the following statements is FALSE?

Accepted Answer

A)  Expected return should rise proportionately with volatility. 
B)  Investors would not choose to hold a portfolio that is more volatile unless they expected to earn a higher return. 
C)  Smaller stocks have lower volatility than larger stocks. 
D)  The largest stocks are typically more volatile than a portfolio of large stocks. 
A)  Expected return should rise proportionately with volatility. 
B)  Investors would not choose to hold a portfolio that is more volatile unless they expected to earn a higher return. 
C)  Smaller stocks have lower volatility than larger stocks. 
D)  The largest stocks are typically more volatile than a portfolio of large stocks.

Question 7

Consider the following price and dividend data for Quicksilver Inc.:
 
Assume that you purchased Quicksilver's 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 total return rate (yield) for this period is closest to ________.

Accepted Answer

A)  0.97% 
B)  -4.00% 
C)  -4.97% 
D)  1.06% 
A)  0.97% 
B)  -4.00% 
C)  -4.97% 
D)  1.06%

Question 8

Suppose you invested $100 in the Ishares High Yield Fund (HYG) a month ago. It paid a dividend of $2 today and then you sold it for $95. What was your dividend yield and capital gains yield on the investment?

Accepted Answer

A)  2%, -5% 
B)  2%, 5% 
C)  -2%, 5% 
D)  5%, 2% 
A)  2%, -5% 
B)  2%, 5% 
C)  -2%, 5% 
D)  5%, 2%

Question 9

Many former employees at AlphaEnergy, an energy trading and supply company, had a large part of their portfolio invested in AlphaEnergy's stock. These employees were bearing a high degree of ________ risk.

Accepted Answer

A)  unsystematic 
B)  systematic 
C)  market-specific 
D)  non-diversifiable 
A)  unsystematic 
B)  systematic 
C)  market-specific 
D)  non-diversifiable

Question 10

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

Accepted Answer

A)  size, risk 
B)  mean, standard deviation 
C)  risk aversion, size 
D)  volatility, mean 
A)  size, risk 
B)  mean, standard deviation 
C)  risk aversion, size 
D)  volatility, mean

The S&P 500 index delivered a return of 25%, 15%, -35%, and -5% over four successive years. What is the arithmetic average annual return for four years?

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 ________.

A company's stock price dropped when it announced that its revenue had decreased because of the quality issues of its products. This is an example of ________.

Which of the following investments had the largest fluctuations overall return over the past eighty years?

Which of the following statements is TRUE?

Which of the following statements is FALSE?

Suppose you invested $100 in the Ishares High Yield Fund (HYG) a month ago. It paid a dividend of $2 today and then you sold it for $95. What was your dividend yield and capital gains yield on the investment?

Many former employees at AlphaEnergy, an energy trading and supply company, had a large part of their portfolio invested in AlphaEnergy's stock. These employees were bearing a high degree of ________ risk.

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

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

Time Value of Money: an Introduction

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Bonds

Stock Valuation

Investment Decision Rules

Fundamentals of Capital Budgeting

Stock Valuation: a Second Look

Systematic Risk and the Equity Risk Premium

The Cost of Capital

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modeling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Option Applications and Corporate Finance

Mergers and Acquisitions

International Corporate Finance

Leasing

Insurance and Risk Management

Corporate Governance

Filters

Exam 11: Risk and Return in Capital Markets

The S&P 500 index delivered a return of 25%, 15%, -35%, and -5% over four successive years. What is the arithmetic average annual return for four years?

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 ________.

A company's stock price dropped when it announced that its revenue had decreased because of the quality issues of its products. This is an example of ________.

Which of the following investments had the largest fluctuations overall return over the past eighty years?

Which of the following statements is TRUE?

Which of the following statements is FALSE?

Suppose you invested $100 in the Ishares High Yield Fund (HYG) a month ago. It paid a dividend of $2 today and then you sold it for $95. What was your dividend yield and capital gains yield on the investment?

Many former employees at AlphaEnergy, an energy trading and supply company, had a large part of their portfolio invested in AlphaEnergy's stock. These employees were bearing a high degree of ________ risk.

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

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

Time Value of Money: an Introduction

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Bonds

Stock Valuation

Investment Decision Rules

Fundamentals of Capital Budgeting

Stock Valuation: a Second Look

Systematic Risk and the Equity Risk Premium

The Cost of Capital

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modeling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Option Applications and Corporate Finance

Mergers and Acquisitions

International Corporate Finance

Leasing

Insurance and Risk Management

Corporate Governance

Filters

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