Exam 10: Risk and Return: Lessons From Market History

The Zolo Co. just declared that it is increasing its annual dividend from $1.00 per share to $1.25 per share. If the stock price remains constant, then:

The returns on your portfolio over the last 5 years were -5%, 20%, 0%, 10% and 5%. What is the arithmetic average return?

Which one of the following statements concerning the standard deviation is correct?

The prices for IMB over the last 3 years are given below. Assuming no dividends were paid, what was the 3-year holding period return?

Suppose you own a risky asset with an expected return of 12% and a standard deviation of 20%. If the returns are normally distributed, the approximate probability of receiving a return greater than 72%, or less than -48% is:

Kids Toy Co. has had total returns over the past five years of 0%, 7%, -2%, 10%, and 12%. What is the percentage change in wealth over the five years

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 percentage rate of return?

The market portfolio of common stocks earned 20.4% last year. Treasury bills earned 5.3% on average last year. The average inflation rate was 2.5%. What was the equity risk premium?

Suppose you are the risk manager of a bank with a trading portfolio of $1 billion. You have just received the latest information about the portfolio allocations made by the trading branch of your bank, who tell you that the portfolio will earn a premium return of 23% over the risk free rate in one year. You have carried out an independent analysis, and find that the return on your portfolio over the next ten days is normally distributed with a mean of 0.77% and a standard deviation of 5%. Find the ten day 1% value at risk for this portfolio.

A stock had returns of 8%, 14%, and 2% for the past three years. Based on these returns, what is the probability that this stock will earn at least 20% in any one given year?

You just sold 200 shares of XYZ Inc. stock at a price of $38.75 a share. Last year you paid $41.50 a share to buy this stock. Over the course of the year, you received dividends totaling $1.64 per share. What is your capital gain on this investment?