Exam 4: Return and Risk

Ashley purchased a share at a price of $27 a share. She received quarterly dividends of $0.75 per share. After one year, Ashley sold the stock at a price of $29.25 a share. What is her percentage total return on this investment?

To compute the present value of $1,000 annuity received at the end of each of the next three years and discounted at the rate of 5% per year, you should use the following EXCEL command.

A capital loss is computed by

The following investment cash flows have been entered into cells B5 through B9 of an EXCEL spreadsheet. B5 $(5,200 ), B6 $2,100, B7 $1,300, B8 $1,800, B9 $1,200, where $5,200 is the cost of the investment and the following amounts are cash flows at the end of years one through four. The correct function for computing the yield on this investment is

Explain the relationship between risk, the expected rate of return and the actual rate of return.

An investment costs $3,500 today. This investment is expected to produce annual cash flows of $1,200, $1,400, $1,300 and $1,100, respectively, over the next four years. What is the internal rate of return on this investment?

To calculate the interest rate or growth rate using a spreadsheet or financial calculator, the present value and the future value most have opposite signs.

If the present value of an investment's benefits equals the present value of the investment's costs, then the investor would earn a

The holding period return is an excellent method for comparing a short- term investment to a long- term investment.

When calculating the present value of either a future single sum or a future annuity, the applicable interest rate is usually called the

The risk associated with a sudden and unforeseen happening that has a significant and usually immediate effect on a firm's financial condition is called

The yield is the rate of return that causes a project to have a zero net present value.

The risk that the rate of return on an investment will be less than expected due to factors that are independent of the investment, such as political, social or economic events, is called

The adage "the sooner one receives a return on a given investment, the better," reflects the financial concept known as the

Business risk is the risk associated with the amount of debt financing used by a firm.

The risk- free rate is equal to the real rate of return plus

Assume that $100 is deposited at the end of each year for five years at 10% compound interest and that no withdrawals are made over the five- year period. Based on this data, which one of the following statements is correct?

Most investors are risk- seeking.

To determine the compounded annual rate of return on investments held for more than a year, investors typically use the present- value- based measure known as yield or

An investment produced annual rates of return of 4%, 8%, 14% and 6%, respectively, over the past four years. What is the standard deviation of these returns?