Exam 12: Return, Risk and the Security Market

The U.S.Securities and Exchange Commission periodically charges individuals with insider trading and claims those individuals have made unfair profits.Given this, you would be most apt to argue that the markets are less than _____ form efficient.

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

A stock had returns of 15 percent, 8 percent, 12 percent, -15 percent, and -4 percent for the past five years.Based on these returns, what is the approximate probability that this stock will return at least 20 percent in any one given year?

You are aware that your neighbor trades stocks based on confidential information he overhears at his workplace.This information is not available to the general public.This neighbor continually brags to you about the profits he earns on these trades.Given this, you would tend to argue that the financial markets are at best _____ form efficient.

What was the highest annual rate of inflation during the period 1926-2010?

Which two of the following are the most likely reasons why a stock price might not react at all on the day that new information related to the stock issuer is released? I.insiders knew the information prior to the announcement II.investors need time to digest the information prior to reacting III.the information has no bearing on the value of the firm IV.the information was anticipated

Six months ago, you purchased 100 shares of stock in Global Trading at a price of $38.70 a share.The stock pays a quarterly dividend of $0.15 a share.Today, you sold all of your shares for $40.10 per share.What is the total amount of your dividend income on this investment?

Which one of the following categories of securities has had the most volatile returns over the period 1926-2010?

If you excel in analyzing the future outlook of firms, you would prefer the financial markets be ____ form efficient so that you can have an advantage in the marketplace.

Individuals who continually monitor the financial markets seeking mispriced securities:

Your friend is the owner of a stock which had returns of 25 percent, -36 percent, 1 percent, and 16 percent for the past four years.Your friend thinks the stock may be able to achieve a return of 50 percent or more in a single year.Based on these returns, what is the probability that your friend is correct?

Which one of the following statements is correct concerning market efficiency?

What is the amount of the risk premium on a U.S.Treasury bill if the risk-free rate is 2.8 percent and the market rate of return is 8.35 percent?

Which one of the following is a correct ranking of securities based on their volatility over the period of 1926-2010? Rank from highest to lowest.

One year ago, you purchased 150 shares of a stock at a price of $54.18 a share.Today, you sold those shares for $40.25 a share.During the past year, you received total dividends of $182 while inflation averaged 4.2 percent.What is your approximate real rate of return on this investment?

Bayside Marina just announced it is decreasing its annual dividend from $1.64 per share to $1.50 per share effective immediately.If the dividend yield remains at its pre-announcement level, then you know the stock price:

Inside information has the least value when financial markets are:

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

A stock has annual returns of 5 percent, 21 percent, -12 percent, 7 percent, and -6 percent for the past five years.The arithmetic average of these returns is _____ percent while the geometric average return for the period is _____ percent.

How can an investor lose money on a stock while making money on a bond investment if there is a reward for bearing risk? Aren't stocks riskier than bonds?