Question 1

The variance of returns for a portfolio of stocks is computed by dividing the sum of the

Accepted Answer

A) squared deviations by (the number of returns minus one). 
B) average returns by (the number of returns minus one). 
C) average returns by (the number of returns plus one). 
D) squared deviations by the average rate of return. 
E) squared deviations by (the number of returns plus one). 
A) squared deviations by (the number of returns minus one). 
B) average returns by (the number of returns minus one). 
C) average returns by (the number of returns plus one). 
D) squared deviations by the average rate of return. 
E) squared deviations by (the number of returns plus one).

Question 2

A stock had returns of 8 percent,13 percent,and −3 percent for the past 3 years.Based on these returns,what is the approximate probability that this stock will earn at least 14.19 percent in any one given year?

Accepted Answer

A) 8.00% 
B) 2.28% 
C) 15.87% 
D) 4.56% 
E) 31.74% 
A) 8.00% 
B) 2.28% 
C) 15.87% 
D) 4.56% 
E) 31.74%

Question 3

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

Accepted Answer

A) geometric return. 
B) total return. 
C) average period return. 
D) variance of returns. 
E) current yield. 
A) geometric return. 
B) total return. 
C) average period return. 
D) variance of returns. 
E) current yield.

Question 4

What conclusion should you draw from the performance of stocks and bonds over the period 1926 to 2015?

Accepted Answer

A) Bonds have greater volatility than stocks. 
B) Stock returns have a lower standard deviation than bond returns. 
C) In any year,stocks will outperform bonds. 
D) Stock returns have a smaller risk premium than bond returns. 
E) Stocks are riskier than bonds. 
A) Bonds have greater volatility than stocks. 
B) Stock returns have a lower standard deviation than bond returns. 
C) In any year,stocks will outperform bonds. 
D) Stock returns have a smaller risk premium than bond returns. 
E) Stocks are riskier than bonds.

Question 5

What are the arithmetic and geometric average returns for a stock with annual returns of 6.2 percent,12.8 percent,−7.7 percent,and 9.4 percent?

Accepted Answer

A) 5.175%; 5.028% 
B) 6.256%; 4.892% 
C) 5.175%; 4.873% 
D) 6.256%; 5.028% 
E) 6.900%; 4.873% 
A) 5.175%; 5.028% 
B) 6.256%; 4.892% 
C) 5.175%; 4.873% 
D) 6.256%; 5.028% 
E) 6.900%; 4.873%

Question 6

The average compound return earned per year over a multiyear period is called the ________ average return.

Accepted Answer

A) real 
B) standard 
C) arithmetic 
D) variant 
E) geometric 
A) real 
B) standard 
C) arithmetic 
D) variant 
E) geometric

Question 7

A review of annualized equity risk premiums by country for the period 1900 to 2010 shows that

Accepted Answer

A) country with the lowest standard deviation had the lowest equity risk premium. 
B) the standard deviation of returns was consistent among countries. 
C) the sharpe ratio for each country is equal. 
D) the United States had the highest risk premium of the countries listed. 
E) Sharpe ratios vary significantly among countries. 
A) country with the lowest standard deviation had the lowest equity risk premium. 
B) the standard deviation of returns was consistent among countries. 
C) the sharpe ratio for each country is equal. 
D) the United States had the highest risk premium of the countries listed. 
E) Sharpe ratios vary significantly among countries.

Question 8

You just sold 600 shares of stock for $42.09 a share.One year ago,you purchased the stock for $44.50 a share and have received dividends totalling $0.68 per share.What is your total capital gain in dollars?

Accepted Answer

A) −$1,446 
B) −$1,038 
C) $1,038 
D) $1,446 
E) $1,854 
A) −$1,446 
B) −$1,038 
C) $1,038 
D) $1,446 
E) $1,854

Question 9

Assume today is December 31,2015.Approximately how long has it been since the annual rate of inflation as measured by the Consumer Price Index has been negative?

Accepted Answer

A) Less than 40 years 
B) Between 40 and 50 years 
C) Between 50 and 60 years 
D) Between 60 and 70 years 
E) More than 70 years 
A) Less than 40 years 
B) Between 40 and 50 years 
C) Between 50 and 60 years 
D) Between 60 and 70 years 
E) More than 70 years

Question 10

What percentage of the time should you expect to earn an annual rate of return that is within two standard deviations of the mean?

Accepted Answer

A) 100% 
B) 95% 
C) 68% 
D) 99% 
E) 75% 
A) 100% 
B) 95% 
C) 68% 
D) 99% 
E) 75%

Question 11

Past performance

Accepted Answer

A) does not guarantee future performance. 
B) is totally unrelated to future performance. 
C) guarantees future performance. 
D) is a perfect representation of future performance for the same length of time. 
E) will be duplicated in the near future. 
A) does not guarantee future performance. 
B) is totally unrelated to future performance. 
C) guarantees future performance. 
D) is a perfect representation of future performance for the same length of time. 
E) will be duplicated in the near future.

Question 12

Assume that during a 7-year period,inflation averaged 2.8 percent,U.S.Treasury bill yields averaged 3.3 percent,and long-term government bond yields averaged 5.9 percent.What was the average rate of return on long-term corporate bonds if they commanded a risk premium of 0.2 percent more than the long-term government bonds?

Accepted Answer

A) 9.2% 
B) 8.9% 
C) 5.7% 
D) 6.1% 
E) 9.4% 
A) 9.2% 
B) 8.9% 
C) 5.7% 
D) 6.1% 
E) 9.4%

Question 13

In 2008,the S&P 500 index had an annual decline of

Accepted Answer

A) 68 percent. 
B) 24 percent. 
C) 46 percent. 
D) 57 percent. 
E) 37 percent. 
A) 68 percent. 
B) 24 percent. 
C) 46 percent. 
D) 57 percent. 
E) 37 percent.

Question 14

One year ago,you purchased a stock at a price of $47.26 a share.Today,you sold the stock and realized a total return of 9.8 percent.Your capital gain was $3.68 a share.What was your dividend yield on this stock?

Accepted Answer

A) 1.25% 
B) 1.85% 
C) 2.01% 
D) 1.75% 
E) 1.35% 
A) 1.25% 
B) 1.85% 
C) 2.01% 
D) 1.75% 
E) 1.35%

Question 15

A stock had returns of 22 percent,1 percent,−27 percent,19 percent,and 7 percent annually for the past 5 years.Based on these returns,what is the approximate probability that this stock will earn at least 60 percent in any one given year?

Accepted Answer

A) almost 0% 
B) slightly more than 2.28% 
C) slightly more than 0.13% 
D) slightly less than 2.28% 
E) slightly less than 0.13% 
A) almost 0% 
B) slightly more than 2.28% 
C) slightly more than 0.13% 
D) slightly less than 2.28% 
E) slightly less than 0.13%

Question 16

The annual returns for KLO stock for the last three years are 7.4 percent,3.2 percent,and 17.8 percent.Assuming no dividends were paid,what was the 3-year holding period percentage return?

Accepted Answer

A) 28.40% 
B) 25.70% 
C) 31.40% 
D) 30.57% 
E) 36.52% 
A) 28.40% 
B) 25.70% 
C) 31.40% 
D) 30.57% 
E) 36.52%

Question 17

A symmetric,bell-shaped frequency distribution that is completely defined by its mean and standard deviation is the ________ distribution.

Accepted Answer

A) gamma 
B) Poisson 
C) bimodal 
D) normal 
E) uniform 
A) gamma 
B) Poisson 
C) bimodal 
D) normal 
E) uniform

Question 18

Which set of characteristics should you prefer in a stock if you desire the highest (least negative)rate of return assuming that you will earn a negative total return for the period?

Accepted Answer

A) High-dividend,high standard deviation 
B) No dividend,high standard deviation 
C) High-dividend,low standard deviation 
D) Low-dividend,high standard deviation 
E) Low-dividend,low standard deviation 
A) High-dividend,high standard deviation 
B) No dividend,high standard deviation 
C) High-dividend,low standard deviation 
D) Low-dividend,high standard deviation 
E) Low-dividend,low standard deviation

Question 19

The arithmetic average return on your portfolio for the past 5 years is 9.3 percent.You earned −7.4 percent,17.1 percent,6.3 percent,and 11.8 percent for 4 of those 5 years.What rate of return did you earn in the fifth year?

Accepted Answer

A) 18.7% 
B) 16.0% 
C) 13.2% 
D) 19.6% 
E) 17.5% 
A) 18.7% 
B) 16.0% 
C) 13.2% 
D) 19.6% 
E) 17.5%

Question 20

For our historical comparison purposes,how are large-company stocks defined?

Accepted Answer

A) Stocks of the lowest 20 percent of the firms listed on the NYSE based on market capitalization 
B) Stocks with average annual returns that exceed the average annual return of the U.S.Treasury bill 
C) Any firm that has been listed on the NYSE for 40 years or more 
D) Stocks of firms included in the S&P 500 composite index 
E) Stocks of firms that employ over 5,000 employees 
A) Stocks of the lowest 20 percent of the firms listed on the NYSE based on market capitalization 
B) Stocks with average annual returns that exceed the average annual return of the U.S.Treasury bill 
C) Any firm that has been listed on the NYSE for 40 years or more 
D) Stocks of firms included in the S&P 500 composite index 
E) Stocks of firms that employ over 5,000 employees

The variance of returns for a portfolio of stocks is computed by dividing the sum of the

A stock had returns of 8 percent,13 percent,and −3 percent for the past 3 years.Based on these returns,what is the approximate probability that this stock will earn at least 14.19 percent in any one given year?

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

What conclusion should you draw from the performance of stocks and bonds over the period 1926 to 2015?

What are the arithmetic and geometric average returns for a stock with annual returns of 6.2 percent,12.8 percent,−7.7 percent,and 9.4 percent?

The average compound return earned per year over a multiyear period is called the ________ average return.

A review of annualized equity risk premiums by country for the period 1900 to 2010 shows that

You just sold 600 shares of stock for $42.09 a share.One year ago,you purchased the stock for $44.50 a share and have received dividends totalling $0.68 per share.What is your total capital gain in dollars?

Assume today is December 31,2015.Approximately how long has it been since the annual rate of inflation as measured by the Consumer Price Index has been negative?

What percentage of the time should you expect to earn an annual rate of return that is within two standard deviations of the mean?

Past performance

In 2008,the S&P 500 index had an annual decline of

One year ago,you purchased a stock at a price of $47.26 a share.Today,you sold the stock and realized a total return of 9.8 percent.Your capital gain was $3.68 a share.What was your dividend yield on this stock?

A stock had returns of 22 percent,1 percent,−27 percent,19 percent,and 7 percent annually for the past 5 years.Based on these returns,what is the approximate probability that this stock will earn at least 60 percent in any one given year?

The annual returns for KLO stock for the last three years are 7.4 percent,3.2 percent,and 17.8 percent.Assuming no dividends were paid,what was the 3-year holding period percentage return?

A symmetric,bell-shaped frequency distribution that is completely defined by its mean and standard deviation is the ________ distribution.

Which set of characteristics should you prefer in a stock if you desire the highest (least negative)rate of return assuming that you will earn a negative total return for the period?

The arithmetic average return on your portfolio for the past 5 years is 9.3 percent.You earned −7.4 percent,17.1 percent,6.3 percent,and 11.8 percent for 4 of those 5 years.What rate of return did you earn in the fifth year?

For our historical comparison purposes,how are large-company stocks defined?

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Return and Risk: The Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividends and Other Payouts

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

International Corporate Finance

Mergers and Acquisitions Web Only

Filters

Exam 10: Risk and Return: Lessons From Market History

The variance of returns for a portfolio of stocks is computed by dividing the sum of the

A stock had returns of 8 percent,13 percent,and −3 percent for the past 3 years.Based on these returns,what is the approximate probability that this stock will earn at least 14.19 percent in any one given year?

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

What conclusion should you draw from the performance of stocks and bonds over the period 1926 to 2015?

What are the arithmetic and geometric average returns for a stock with annual returns of 6.2 percent,12.8 percent,−7.7 percent,and 9.4 percent?

The average compound return earned per year over a multiyear period is called the ________ average return.

A review of annualized equity risk premiums by country for the period 1900 to 2010 shows that

You just sold 600 shares of stock for $42.09 a share.One year ago,you purchased the stock for $44.50 a share and have received dividends totalling $0.68 per share.What is your total capital gain in dollars?

Assume today is December 31,2015.Approximately how long has it been since the annual rate of inflation as measured by the Consumer Price Index has been negative?

What percentage of the time should you expect to earn an annual rate of return that is within two standard deviations of the mean?

Past performance

In 2008,the S&P 500 index had an annual decline of

One year ago,you purchased a stock at a price of $47.26 a share.Today,you sold the stock and realized a total return of 9.8 percent.Your capital gain was $3.68 a share.What was your dividend yield on this stock?

A stock had returns of 22 percent,1 percent,−27 percent,19 percent,and 7 percent annually for the past 5 years.Based on these returns,what is the approximate probability that this stock will earn at least 60 percent in any one given year?

The annual returns for KLO stock for the last three years are 7.4 percent,3.2 percent,and 17.8 percent.Assuming no dividends were paid,what was the 3-year holding period percentage return?

A symmetric,bell-shaped frequency distribution that is completely defined by its mean and standard deviation is the ________ distribution.

Which set of characteristics should you prefer in a stock if you desire the highest (least negative)rate of return assuming that you will earn a negative total return for the period?

The arithmetic average return on your portfolio for the past 5 years is 9.3 percent.You earned −7.4 percent,17.1 percent,6.3 percent,and 11.8 percent for 4 of those 5 years.What rate of return did you earn in the fifth year?

For our historical comparison purposes,how are large-company stocks defined?

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Return and Risk: The Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividends and Other Payouts

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

International Corporate Finance

Mergers and Acquisitions Web Only

Filters