The table below shows market data for two stocks on two days.The two stocks are the components of a value weighted index like the S&P 500. Calculate the percentage change in the index over the two days. \[\begin{array} { | c | c | c | c | c | } \hline & \text { Stock 1 } & & \text { Stock 2 } & \\ \hline \text { Date } & \text { Price } & \text { Shares Outstanding } & \text { Price } & \text { Shares Outstanding } \\ \hline 1 & \$ 1 & 100 & \$ 2 & 150 \\ \hline 2 & \$ 1.50 & 100 & \$ 2.20 & 150 \\ \hline \end{array}\]

A) 10% B) 20% C) 30% D) 40% E) 50% A) 10% B) 20% C) 30% D) 40% E) 50%

A home insurance company anticipates the following pattern of claims, based on historical data. What is the expected claim on the next policy sold by the company? $\begin{array}{c} \begin{array}{|c|} \hline\\ \\ \\ \text { Type of Claim }\\ \hline1 \\ \hline 2 \\ \hline 3 \\ \hline 4\\ \hline \end{array} \begin{array}{c} \hline\\ \\ \\ \text { Size of Claim }\\ \hline \$ 200,000 \\ \hline \$ 50,000 \\ \hline \$ 2,000 \\ \hline \$ 0\\ \hline \end{array} \begin{array}{|c|} \hline \text {Number of}\\ \text { Claims out of}\\ \text {10,000 Policy }\\ \text {Holders}\\ \hline 1 \\ \hline 10 \\ \hline 200 \\ \hline 9,789\\ \hline \end{array} \begin{array}{c|} \hline\\ \\ \\ \text { Probability } \\ \hline 0.0001 \\ \hline 0.001 \\ \hline 0.02 \\ \hline 0.9789\\ \hline \end{array} \end{array}$

A) $100 B) $110 C) $120 D) $130 E) $140 A) $100 B) $110 C) $120 D) $130 E) $140

Exam 5: Risk and Return - Introduction

It costs $1,000 to enter the following game of chance, which is based on the outcome of a coin toss (fair coin). If the coin comes up 'heads', you win and walk away with $2,000, which is a 100% rate of return. However, if the coin comes up 'tails', you lose and walk away with nothing, which is a - 100% rate of return. What is the expected return on this gamble?

(Multiple Choice)

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Question 21

You are watching the Inter Milan vs. Barcelona Champions League game with your best friend Joe. You make a deal with Joe: If Barcelona wins, you walk away with $110. If Inter Milan wins, you walk away with $50. If you paid $100, what is your expected return assuming that each team has an equal probability of winning?

(Multiple Choice)

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Question 22

If Microsoft stockholders expect either a 25% return or a 2% return, each with a 50% probability, and Apple Computer shareholders expect a 10% return with certainty, what is the expected return from a portfolio comprised of equal amounts of stock from both firms?

(Multiple Choice)

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Question 23

Assume you currently hold one type of security and decide to construct a portfolio. Which of the following would provide the greatest degree of risk reduction?

(Multiple Choice)

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Question 24

If the probability of a 20% return is 70% and the probability of a 3% loss is 30%, what is the expected return?

(Multiple Choice)

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Question 25

It costs $1,000 to enter the following game of chance, which is based on the outcome of a coin toss (fair coin). If the coin comes up 'heads' then you win and walk away with $1,100, which is a 10% rate of return. If the coin comes up 'tails', then you lose and walk away with $900, which is a -10% rate of return. What is the variance of the returns?

(Multiple Choice)

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Question 26

You bought a stock for $80.00 and sold it after three years for $95.00. While you held the stock it paid $3.00 in dividends. What is the annualized return?

(Multiple Choice)

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Question 27

The table below shows market data for two stocks on two days.The two stocks are the components of a value weighted index like the S&P 500. Calculate the percentage change in the index over the two days. Stock 1 Stock 2 Date Price Shares Outstanding Price Shares Outstanding 1 \ 1 100 \ 2 150 2 \ 1.50 100 \ 2.20 150

(Multiple Choice)

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Question 28

You bought 200 shares of Microsoft at $50 per share, 100 shares of IBM for $100 a share and 300 shares of Amazon.com for $25 per share. What is the portfolio weight on the Amazon.com holding?

(Multiple Choice)

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Question 29

A company will earn 10% returns in a poor economy, 15% returns in a normal economy, and 25% returns in a booming economy. What is the standard deviation if there is a 25% chance of a poor economy and a 25% chance of a booming economy?

(Multiple Choice)

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Question 30

A home insurance company anticipates the following pattern of claims, based on historical data. What is the expected claim on the next policy sold by the company? Type of Claim 1 2 3 4 Size of Claim \ 200,000 \ 50,000 \ 2,000 \ 0 Number of Claims out of 10,000 Policy Holders 1 10 200 9,789 Probability 0.0001 0.001 0.02 0.9789

(Multiple Choice)

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Question 31

Which of the following would be the most useful to an investor who is evaluating securities to add to her portfolio?

(Multiple Choice)

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Question 32

Consider the following bet: heads I pay you a dollar, tails you pay me a dollar. What is the expected payoff (return)of this bet? (Assume a fair coin.)

(Multiple Choice)

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Question 33

If the probability of a 20% return is 70% and the probability of a 4% loss is 30%, what is the expected return to the nearest whole percentage?

(Multiple Choice)

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Question 34

To earn a return, you must incur risk.

(Multiple Choice)

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Question 35

After taking a reading-week trip to the Dominican Republic, you are now hooked on Cuban cigars. You decide to build a stock portfolio with two different cigar companies: Altadis'Behike(Altadis) Gurkha'sHis Majesty's Reserve (Gurkhas) You purchase 1,000 Altadis' shares, each at a price of $45. You also purchase 1,200 Gurkha's shares, each at a price of $65. Calculate Altadis' portfolio weight.

(Multiple Choice)

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Question 36

If General Motors expects profits of $50 million in a booming economy, what is the expected profit during a recession if this is the only other possibility and the overall expected profit is $35 million? The probability of a recession is 70%.

(Multiple Choice)

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Question 37

You pay $1,000 to flip a two-sided, fair coin at the local fair. If you flip heads, you walk away with $3,000, a return of 200%. However, if you flip tails, you walk away with $250, a return of -75%. What is the standard deviation of the returns?

(Multiple Choice)

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Question 38

Frank's Franks went public and opened at $15.00 per share. One year later the stock was selling for $17.50 per share. What was the holding period return if during the year Frank sent out $1.25 per share in dividends?

(Multiple Choice)

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Question 39

A year ago, you purchased IBM stock for $94 a share. Today, IBM stock is selling for $93 a share. Additionally, you just received a check for $1.20 per share. Your holding period return is

(Multiple Choice)

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Question 40

Showing 21 - 40 of 46

If Microsoft stockholders expect either a 25% return or a 2% return, each with a 50% probability, and Apple Computer shareholders expect a 10% return with certainty, what is the expected return from a portfolio comprised of equal amounts of stock from both firms?

Assume you currently hold one type of security and decide to construct a portfolio. Which of the following would provide the greatest degree of risk reduction?

If the probability of a 20% return is 70% and the probability of a 3% loss is 30%, what is the expected return?

You bought a stock for $80.00 and sold it after three years for $95.00. While you held the stock it paid $3.00 in dividends. What is the annualized return?

You bought 200 shares of Microsoft at $50 per share, 100 shares of IBM for $100 a share and 300 shares of Amazon.com for $25 per share. What is the portfolio weight on the Amazon.com holding?

A company will earn 10% returns in a poor economy, 15% returns in a normal economy, and 25% returns in a booming economy. What is the standard deviation if there is a 25% chance of a poor economy and a 25% chance of a booming economy?

Which of the following would be the most useful to an investor who is evaluating securities to add to her portfolio?

Consider the following bet: heads I pay you a dollar, tails you pay me a dollar. What is the expected payoff (return)of this bet? (Assume a fair coin.)

If the probability of a 20% return is 70% and the probability of a 4% loss is 30%, what is the expected return to the nearest whole percentage?

To earn a return, you must incur risk.

If General Motors expects profits of $50 million in a booming economy, what is the expected profit during a recession if this is the only other possibility and the overall expected profit is $35 million? The probability of a recession is 70%.

You pay $1,000 to flip a two-sided, fair coin at the local fair. If you flip heads, you walk away with $3,000, a return of 200%. However, if you flip tails, you walk away with $250, a return of -75%. What is the standard deviation of the returns?

Frank's Franks went public and opened at $15.00 per share. One year later the stock was selling for $17.50 per share. What was the holding period return if during the year Frank sent out $1.25 per share in dividends?

A year ago, you purchased IBM stock for $94 a share. Today, IBM stock is selling for $93 a share. Additionally, you just received a check for $1.20 per share. Your holding period return is

Overview of Finance

Financial Statements and Ratio Analysis

Time Value of Money - Introduction

Time Value of Money - Streams and Valuations

Portfolio Theory

Interest Rates and Bond Valuation

Stock Valuation and Market Efficiency

Capital Budgeting Techniques

Capital Budgeting - Cash Flows

Cost of Capital

Capital Structure

Dividends, Repurchases, and Splits

Financial Planning

The Management of Working Capital

International Finance

Filters

Exam 5: Risk and Return - Introduction

If Microsoft stockholders expect either a 25% return or a 2% return, each with a 50% probability, and Apple Computer shareholders expect a 10% return with certainty, what is the expected return from a portfolio comprised of equal amounts of stock from both firms?

Assume you currently hold one type of security and decide to construct a portfolio. Which of the following would provide the greatest degree of risk reduction?

If the probability of a 20% return is 70% and the probability of a 3% loss is 30%, what is the expected return?

You bought a stock for $80.00 and sold it after three years for $95.00. While you held the stock it paid $3.00 in dividends. What is the annualized return?

You bought 200 shares of Microsoft at $50 per share, 100 shares of IBM for $100 a share and 300 shares of Amazon.com for $25 per share. What is the portfolio weight on the Amazon.com holding?

A company will earn 10% returns in a poor economy, 15% returns in a normal economy, and 25% returns in a booming economy. What is the standard deviation if there is a 25% chance of a poor economy and a 25% chance of a booming economy?

Which of the following would be the most useful to an investor who is evaluating securities to add to her portfolio?

Consider the following bet: heads I pay you a dollar, tails you pay me a dollar. What is the expected payoff (return)of this bet? (Assume a fair coin.)

If the probability of a 20% return is 70% and the probability of a 4% loss is 30%, what is the expected return to the nearest whole percentage?

To earn a ________ return, you must incur ________ risk.

If General Motors expects profits of $50 million in a booming economy, what is the expected profit during a recession if this is the only other possibility and the overall expected profit is $35 million? The probability of a recession is 70%.

You pay $1,000 to flip a two-sided, fair coin at the local fair. If you flip heads, you walk away with $3,000, a return of 200%. However, if you flip tails, you walk away with $250, a return of -75%. What is the standard deviation of the returns?

Frank's Franks went public and opened at $15.00 per share. One year later the stock was selling for $17.50 per share. What was the holding period return if during the year Frank sent out $1.25 per share in dividends?

A year ago, you purchased IBM stock for $94 a share. Today, IBM stock is selling for $93 a share. Additionally, you just received a check for $1.20 per share. Your holding period return is

Overview of Finance

Financial Statements and Ratio Analysis

Time Value of Money - Introduction

Time Value of Money - Streams and Valuations

Portfolio Theory

Interest Rates and Bond Valuation

Stock Valuation and Market Efficiency

Capital Budgeting Techniques

Capital Budgeting - Cash Flows

Cost of Capital

Capital Structure

Dividends, Repurchases, and Splits

Financial Planning

The Management of Working Capital

International Finance

Filters

To earn a return, you must incur risk.