Exam 10: Risk and Return: Lessons From Market History

You bought 100 shares of stock at $20 each. At the end of the year, you received a total of $400 in dividends, and your stock was worth $2,500 total. What was your total dollar return?

If you were to estimate the expected return on the market portfolio, you would need to know or estimate:

A capital gain occurs when:

The market portfolio of common stocks earned 14.7% last year. Treasury bills earned 5.7% on average last year. The average inflation rate was 4.0%. What was the real return on equities?

Explain why a financial manager of a large company should use the standard deviation as the measure of risk to determine the discount rate?

The total annual returns on common stocks averaged 13.3% from 1957 to 2003. Small company stocks averaged 10.64%, long-term bonds averaged 8.96%, while Treasury Bills averaged 6.8%. What was the average risk premium earned by long-term Bonds, and small company stocks respectively?

A year ago, you purchased 500 shares of New Tech stock at a price of $49.03 per share. The stock pays an annual dividend of $.10 per share. Today, you sold all of your shares for $58.14 per share. What is your total dollar return on this investment?

The long term inflation rate average was 3.2% and you invested in long term corporate bonds over the same period which earned 6.1%. What was the average risk premium you earned and your precise rate of return?

Which one of the following is a correct statement concerning risk premium?

List 2 shortcomings of using value at risk (VaR) as a risk management tool.

The capital gains yield plus the dividend yield on a security is called the:

A stock has returns of 3%, 18%, -24%, and 16% for the past four years. Based on this information, what is the 95% probability range for any one given year?

A stock had the following prices and dividends. What is the geometric average return on this stock?

The average compound return earned per year over a multi-year period is called the _____ average return.

Six months ago, you purchased 100 shares of stock in ABC Co. at a price of $43.89 a share. ABC stock pays a quarterly dividend of $.10 a share. Today, you sold all of your shares for $45.13 per share. What is the total amount of your capital gains on this investment?

A security has an expected return of 10% and a standard deviation of.03. If the security is normally distributed, then about 68% of the time, the security return will be

Excelsior share are currently selling for $25.00 each. You bought 200 shares one year ago at $24 and received dividend payments of $1.50 per share. What was your percentage rate of return?

The return on your portfolio over the last 5 years were -5%, 20%, 0%, 10% and 5%. What was the standard deviation of your return? What is your best guess as to next year's return?

Estimates using the arithmetic average will probably tend to _____ values over the long-term while estimates using the geometric average will probably tend to _____ values over the short-term.

Last year you bought some Alpha stock for $26.75 a share. It is currently selling for $32.50. You received a dividend of $2.25 during the year. What is your total rate of return?