Question 1

IGM Realty had a price of $30,$30,$35,$33,and $25 at the end of the last five quarters.If IGM pays a dividend of $2 at the end of each quarter,what is the annual realized return on IGM?

Accepted Answer

A)  8.61% 
B)  7.6% 
C)  7.10% 
D)  8.09% 
E)  8.24%

Question 2

A portfolio of stocks where each stock has a large component of independent risk benefits when such stocks are held in a portfolio,because the independent risks are averaged out.This is also referred to as diversification of risks.

Accepted Answer

A) True 
 B)False

Question 3

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 31,2014 and sold it at the closing price on December 30,2015.Your realized annual return is for the year 2015 is closest to:

Accepted Answer

A)  -44.5% 
B)  -45.1% 
C)  -47.3% 
D)  -48.5% 
E)  -46.3%

Question 4

Amazon.com stock prices gave a realized return of 5%,-5%,10%,and -10% over four successive quarters.What is the annual realized return for Amazon.com for the year?

Accepted Answer

A)  -1.25% 
B)  2.50% 
C)  0.00% 
D)  1.25% 
E)  1.00%

Question 5

Suppose you invested $60 in the Ishares Dividend Stock Fund (DVY)a month ago.It paid a dividend of $0.70 today and then you sold it for $65.What was your return on the investment?

Accepted Answer

A)  8.25% 
B)  9.00% 
C)  9.50% 
D)  9.75% 
E)  10.00%

Question 6

Suppose that a stock gave a realized return of 20% over a two-year time period and a 10% return over the third year.The geometric average annual return is:

Accepted Answer

A)  9.70% 
B)  11.20% 
C)  14.96% 
D)  15.00% 
E)  16.55%

Question 7

The average annual return over the period 1886-2006 for stocks that comprise the S&P 500 is 12%,and the standard deviation of returns is 20%.Based on these numbers,what is a 95% confidence interval for 2007 returns?

Accepted Answer

A)  -28%, 52% 
B)  -10%,40% 
C)  -20%,35% 
D)  -15%, 35% 
E)  -5%, 25%

Question 8

Ivanhoe Energy Inc had realized returns of 5.5%,-3.6%,8%,and 7.5% over four quarters.What is the quarterly standard deviation of returns for Ivanhoe?

Accepted Answer

A)  21.95% 
B)  29.26% 
C)  5.41% 
D)  4.68% 
E)  4.35%

Question 9

Suppose you invested $150 in Tesla Motors one month ago.It paid a dividend of $1.55,and you sold it right after the dividend was paid for $162.What was your realized return from holding the stock?

Accepted Answer

A)  6% 
B)  1% 
C)  9% 
D)  8% 
E)  7%

Question 10

There is a clear link between the volatility of returns for individual stocks and and the returns for individual stocks.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A)  systematic, undiversifiable 
B)  systematic, unsystematic 
C)  diversifiable, diversifiable 
D)  diversifiable, unsystematic 
E)  unsystematic, diversifiable

Question 12

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

Accepted Answer

A)  unsystematic 
B)  systematic 
C)  unsystematic and systematic 
D)  unwanted 
E)  market

Question 13

The S&P TSX Composite index delivered annual returns of 17.61%,-8.71%,7.19% and 12.99% from 2010 to 2013.What is a 95% confidence interval for the 2014 return?

Accepted Answer

A)  4.2% to 11.47% 
B)  7.27% to 11.47% 
C)  -4.2% to 18.74% 
D)  -2.67% to 17.21% 
E)  6.91% to 7.63%

Question 14

The average annual return over the period 1886-2006 for stocks that comprise the S&P 500 is 10.5%,and the standard deviation of returns is 18.5%.Based on these numbers,what is a 95% confidence interval for 2007 returns?

Accepted Answer

A)  -18.5%, 18.5% 
B)  -10%, 10% 
C)  -26.5%, 47.5% 
D)  -37%, 37% 
E)  -8%, 29%

Question 15

The risk that inflation rates are likely to increase in the next year is an example of common risk.

Accepted Answer

A) True 
 B)False

Question 16

Stocks with high returns are expected to have

Accepted Answer

A)  high variability. 
B)  low variability. 
C)  no relation to variability. 
D)  inverse relationship with variability. 
E)  no variability.

Question 17

Use the table for the question(s) below.
Consider the following realized annual returns:
 
-The average annual return on IBM from 1996 to 2005 is closest to:

Accepted Answer

A)  18.2% 
B)  16.40% 
C)  18.7% 
D)  29.9% 
E)  20.24%

Question 18

The Ishares Bond Index fund (TLT)has a mean and annual standard deviation of returns of 7% and 10%,respectively.What is the 66% confidence interval for the returns on TLT?

Accepted Answer

A)  -5%,10% 
B)  7%,10% 
C)  -3%, 17% 
D)  -10%,10% 
E)  -5%, 15%

Question 19

Your investment over one year had a realized return of 9% and a dividend yield of 6%.If the sale price was $45 per share,what was the cost of the investment?

Accepted Answer

A)  $41.28 
B)  $43.69 
C)  $44.21 
D)  $45.00 
E)  $46.35

Question 20

Independent risk is more closely related to

Accepted Answer

A)  unsystematic risk. 
B)  systematic risk. 
C)  common risk. 
D)  diversification risk. 
E)  unwanted risk.

Exam 10: Risk and Return in Capital Markets

IGM Realty had a price of $30,$30,$35,$33,and $25 at the end of the last five quarters.If IGM pays a dividend of $2 at the end of each quarter,what is the annual realized return on IGM?

A portfolio of stocks where each stock has a large component of independent risk benefits when such stocks are held in a portfolio,because the independent risks are averaged out.This is also referred to as diversification of risks.

Amazon.com stock prices gave a realized return of 5%,-5%,10%,and -10% over four successive quarters.What is the annual realized return for Amazon.com for the year?

Suppose you invested $60 in the Ishares Dividend Stock Fund (DVY) a month ago.It paid a dividend of $0.70 today and then you sold it for $65.What was your return on the investment?

Suppose that a stock gave a realized return of 20% over a two-year time period and a 10% return over the third year.The geometric average annual return is:

The average annual return over the period 1886-2006 for stocks that comprise the S&P 500 is 12%,and the standard deviation of returns is 20%.Based on these numbers,what is a 95% confidence interval for 2007 returns?

Ivanhoe Energy Inc had realized returns of 5.5%,-3.6%,8%,and 7.5% over four quarters.What is the quarterly standard deviation of returns for Ivanhoe?

Suppose you invested $150 in Tesla Motors one month ago.It paid a dividend of $1.55,and you sold it right after the dividend was paid for $162.What was your realized return from holding the stock?

There is a clear link between the volatility of returns for individual stocks and and the returns for individual stocks.

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

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

The S&P TSX Composite index delivered annual returns of 17.61%,-8.71%,7.19% and 12.99% from 2010 to 2013.What is a 95% confidence interval for the 2014 return?

The average annual return over the period 1886-2006 for stocks that comprise the S&P 500 is 10.5%,and the standard deviation of returns is 18.5%.Based on these numbers,what is a 95% confidence interval for 2007 returns?

The risk that inflation rates are likely to increase in the next year is an example of common risk.

Stocks with high returns are expected to have

Use the table for the question(s) below. Consider the following realized annual returns: -The average annual return on IBM from 1996 to 2005 is closest to:

The Ishares Bond Index fund (TLT) has a mean and annual standard deviation of returns of 7% and 10%,respectively.What is the 66% confidence interval for the returns on TLT?

Your investment over one year had a realized return of 9% and a dividend yield of 6%.If the sale price was $45 per share,what was the cost of the investment?

Independent risk is more closely related to