Question 1

The standard deviation for a set of stock returns can be calculated as the:

Accepted Answer

A) positive square root of the variance. 
B) variance squared. 
C) positive square root of the average return. 
D) average return divided by N minus one, where N is the number of returns. 
E) average squared difference between the actual return and the average return. 
A) positive square root of the variance. 
B) variance squared. 
C) positive square root of the average return. 
D) average return divided by N minus one, where N is the number of returns. 
E) average squared difference between the actual return and the average return.

Question 2

Over the past five years,a stock produced returns of 14%,22%,-16%,2%,and 10%.What is the probability that an investor in this stock will NOT lose more than 8% nor earn more than 21% in any one given year?

Accepted Answer

A) 34% 
B) 68% 
C) 95% 
D) 99% 
E) 100% 
A) 34% 
B) 68% 
C) 95% 
D) 99% 
E) 100%

Question 3

Which of the following statements concerning the standard deviation are correct?
I.The greater the standard deviation,the lower the risk.
II.The standard deviation is a measure of volatility.
III.The higher the standard deviation,the less certain the rate of return in any one given year.
IV.The higher the standard deviation,the higher the expected return.

Accepted Answer

A) I and III only 
B) II, III, and IV only 
C) I, III, and IV only 
D) I, II, and III only 
E) I, II, III, and IV 
A) I and III only 
B) II, III, and IV only 
C) I, III, and IV only 
D) I, II, and III only 
E) I, II, III, and IV

Question 4

You bought 100 shares of stock at $25 each.At the end of the year,you received a total of $500 in dividends,and your stock was worth $2,500 total.What was total dollar capital gain and total dollar return?

Accepted Answer

A) $0; $500 
B) $400; $900 
C) $500; $900 
D) $900; $2,500 
E) None of the above. 
A) $0; $500 
B) $400; $900 
C) $500; $900 
D) $900; $2,500 
E) None of the above.

Question 5

Excelsior shares are currently selling for $25.75 each.You bought 200 shares one year ago at $24 and received dividend payments of $1.60 per share.What was your percentage capital gain this year?

Accepted Answer

A) 4.17% 
B) 6.80% 
C) 10.42% 
D) 104.17% 
E) 110.42% 
A) 4.17% 
B) 6.80% 
C) 10.42% 
D) 104.17% 
E) 110.42%

Question 6

The return pattern on your favorite stock has been 7%,10%,-14%,10%,16% over the last five years.What has your average return and holding period return over the last 5 years?

Accepted Answer

A) 5.8%; 5.8% 
B) 5.8%; 29.2% 
C) 9.4%; 7.2% 
D) 9.4%; 35.8% 
E) None of the above. 
A) 5.8%; 5.8% 
B) 5.8%; 29.2% 
C) 9.4%; 7.2% 
D) 9.4%; 35.8% 
E) None of the above.

Question 7

Little John Industries sold for $1.90 on January 1 and ended the year at a price of $2.50.In addition,the stock paid dividends of $0.20 per share.Calculate Little John's dividend yield,capital gain yield,and total rate of return for the year.

Accepted Answer

Dividend yield = $0.20/$1.90 =

Question 8

A stock had returns of 8%,39%,11%,and -24% for the past four years.Which one of the following best describes the probability that this stock will NOT lose more than 43% in any one given year?

Accepted Answer

A) 84.0% 
B) 95.0% 
C) 97.5% 
D) 99.0% 
E) 99.5% 
A) 84.0% 
B) 95.0% 
C) 97.5% 
D) 99.0% 
E) 99.5%

Question 9

What are the arithmetic and geometric average returns for a stock with annual returns of 4%,10%,-6%,and 19%?

Accepted Answer

A) 5.89%; 6.25% 
B) 6.25%; 5.89% 
C) 6.75%; 6.35% 
D) 8.3%; 5.89% 
E) 8.3%; 6.25% 
A) 5.89%; 6.25% 
B) 6.25%; 5.89% 
C) 6.75%; 6.35% 
D) 8.3%; 5.89% 
E) 8.3%; 6.25%

Question 10

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?

Accepted Answer

A) -8.4 to 11.7% 
B) -16.1 to 22.6% 
C) -24.5 to 34.3% 
D) -35.4 to 41.9% 
E) -54.8 to 61.3% 
A) -8.4 to 11.7% 
B) -16.1 to 22.6% 
C) -24.5 to 34.3% 
D) -35.4 to 41.9% 
E) -54.8 to 61.3%

Question 11

Today,you sold 200 shares of SLG,Inc.stock.Your total return on these shares is 12.5%.You purchased the shares one year ago at a price of $28.50 a share.You have received a total of $280 in dividends over the course of the year.What is your capital gains yield on this investment?

Accepted Answer

A) 4.80% 
B) 5.00% 
C) 6.67% 
D) 7.59% 
E) 11.67% 
A) 4.80% 
B) 5.00% 
C) 6.67% 
D) 7.59% 
E) 11.67%

Question 12

The standard deviation on small company stocks:
I.is greater than the standard deviation on large company stocks.
II.is less than the standard deviation on large company stocks.
III.had an average value of about 33% for the period 1926 to 2004.
IV.had an average value of about 20% for the period 1926 to 2004.

Accepted Answer

A) I and III only 
B) I and II only 
C) II and III only 
D) II and IV only 
E) I and IV only 
A) I and III only 
B) I and II only 
C) II and III only 
D) II and IV only 
E) I and IV only

Question 13

The excess return you earn by moving from a relatively risk-free investment to a risky investment is called the:

Accepted Answer

A) geometric average return. 
B) inflation premium. 
C) risk premium. 
D) time premium. 
E) arithmetic average return. 
A) geometric average return. 
B) inflation premium. 
C) risk premium. 
D) time premium. 
E) arithmetic average return.

Question 14

The average risk premium on U.S.Treasury bills over the period of 1926 to 2009 was _______%.

Accepted Answer

A) 0.0 
B) 1.5 
C) 2.6 
D) 3.2 
E) 3.5 
A) 0.0 
B) 1.5 
C) 2.6 
D) 3.2 
E) 3.5

Question 15

Suppose you have $30,000 invested in the stock market and your banker comes to you and tries to get you to move that money into the bank's certificates of deposit (CDs).He explains that the CDs are 100% government insured and that you are taking unnecessary risks by being in the stock market.How would you respond?

Accepted Answer

The usual response is that bank CDs typi

Question 16

You purchased 100 shares of stock at a price of $35.72 per share.Over the last year,you have received total dividend income of $312.What is the dividend yield?

Accepted Answer

A) 3.2% 
B) 4.4% 
C) 8.7% 
D) 9.2% 
E) 11.4% 
A) 3.2% 
B) 4.4% 
C) 8.7% 
D) 9.2% 
E) 11.4%

Question 17

Six months ago,you purchased 100 shares of stock in ABC Co.at a price of $44.89 a share.ABC stock pays a quarterly dividend of $.15 a share.Today,you sold all of your shares for $46.23 per share.What is the total amount of your capital gains on this investment?

Accepted Answer

A) $1.24 
B) $1.64 
C) $40.00 
D) $134.00 
E) $154.00 
A) $1.24 
B) $1.64 
C) $40.00 
D) $134.00 
E) $154.00

Question 18

On average,for the period 1926 through 2009:

Accepted Answer

A) the real rate of return on U.S.Treasury bills has been negative. 
B) small company stocks have underperformed large company stocks. 
C) the risk premium on long-term corporate bonds has exceeded the risk premium on long-term government bonds. 
D) long-term government bonds have produced higher returns than long-term corporate bonds. 
E) the risk premium on large company stocks has exceeded the risk premium on small company stocks. 
A) the real rate of return on U.S.Treasury bills has been negative. 
B) small company stocks have underperformed large company stocks. 
C) the risk premium on long-term corporate bonds has exceeded the risk premium on long-term government bonds. 
D) long-term government bonds have produced higher returns than long-term corporate bonds. 
E) the risk premium on large company stocks has exceeded the risk premium on small company stocks.

Question 19

Over the period of 1926 through 2009,the annual rate of return on _____ has been more volatile than the annual rate of return on _____.

Accepted Answer

A) large company stocks; small company stocks 
B) U.S.Treasury bills; long-term government bonds 
C) long-term corporate bonds; small company stocks 
D) large company stocks; long-term corporate bonds 
E) U.S.Treasury bills; small company stocks 
A) large company stocks; small company stocks 
B) U.S.Treasury bills; long-term government bonds 
C) long-term corporate bonds; small company stocks 
D) large company stocks; long-term corporate bonds 
E) U.S.Treasury bills; small company stocks

Question 20

A stock had returns of 11%,1%,9%,15%,and -6% for the past five years.Based on these returns,what is the approximate probability that this stock will earn at least 23% in any one given year?

Accepted Answer

A) 0.5% 
B) 1.0% 
C) 2.5% 
D) 5.0% 
E) 16.0% 
A) 0.5% 
B) 1.0% 
C) 2.5% 
D) 5.0% 
E) 16.0%

The standard deviation for a set of stock returns can be calculated as the:

Over the past five years,a stock produced returns of 14%,22%,-16%,2%,and 10%.What is the probability that an investor in this stock will NOT lose more than 8% nor earn more than 21% in any one given year?

You bought 100 shares of stock at $25 each.At the end of the year,you received a total of $500 in dividends,and your stock was worth $2,500 total.What was total dollar capital gain and total dollar return?

Excelsior shares are currently selling for $25.75 each.You bought 200 shares one year ago at $24 and received dividend payments of $1.60 per share.What was your percentage capital gain this year?

The return pattern on your favorite stock has been 7%,10%,-14%,10%,16% over the last five years.What has your average return and holding period return over the last 5 years?

Little John Industries sold for $1.90 on January 1 and ended the year at a price of $2.50.In addition,the stock paid dividends of $0.20 per share.Calculate Little John's dividend yield,capital gain yield,and total rate of return for the year.

A stock had returns of 8%,39%,11%,and -24% for the past four years.Which one of the following best describes the probability that this stock will NOT lose more than 43% in any one given year?

What are the arithmetic and geometric average returns for a stock with annual returns of 4%,10%,-6%,and 19%?

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?

Today,you sold 200 shares of SLG,Inc.stock.Your total return on these shares is 12.5%.You purchased the shares one year ago at a price of $28.50 a share.You have received a total of $280 in dividends over the course of the year.What is your capital gains yield on this investment?

The excess return you earn by moving from a relatively risk-free investment to a risky investment is called the:

The average risk premium on U.S.Treasury bills over the period of 1926 to 2009 was _______%.

You purchased 100 shares of stock at a price of $35.72 per share.Over the last year,you have received total dividend income of $312.What is the dividend yield?

Six months ago,you purchased 100 shares of stock in ABC Co.at a price of $44.89 a share.ABC stock pays a quarterly dividend of $.15 a share.Today,you sold all of your shares for $46.23 per share.What is the total amount of your capital gains on this investment?

On average,for the period 1926 through 2009:

Over the period of 1926 through 2009,the annual rate of return on _ has been more volatile than the annual rate of return on _.

A stock had returns of 11%,1%,9%,15%,and -6% for the past five years.Based on these returns,what is the approximate probability that this stock will earn at least 23% in any one given year?

Introduction to Corporate Finance

Financial Statements Cash Flow

Financial Statements Analysis and Long-Term Planning

Discounted Cash Flow Valuation

Interest Rate 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 Capital Budgeting

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividend and Other Payouts

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

International Corporate Finance

Filters

Exam 10: Risk and Return Lessons From Market History

The standard deviation for a set of stock returns can be calculated as the:

Over the past five years,a stock produced returns of 14%,22%,-16%,2%,and 10%.What is the probability that an investor in this stock will NOT lose more than 8% nor earn more than 21% in any one given year?

You bought 100 shares of stock at $25 each.At the end of the year,you received a total of $500 in dividends,and your stock was worth $2,500 total.What was total dollar capital gain and total dollar return?

Excelsior shares are currently selling for $25.75 each.You bought 200 shares one year ago at $24 and received dividend payments of $1.60 per share.What was your percentage capital gain this year?

The return pattern on your favorite stock has been 7%,10%,-14%,10%,16% over the last five years.What has your average return and holding period return over the last 5 years?

Little John Industries sold for $1.90 on January 1 and ended the year at a price of $2.50.In addition,the stock paid dividends of $0.20 per share.Calculate Little John's dividend yield,capital gain yield,and total rate of return for the year.

A stock had returns of 8%,39%,11%,and -24% for the past four years.Which one of the following best describes the probability that this stock will NOT lose more than 43% in any one given year?

What are the arithmetic and geometric average returns for a stock with annual returns of 4%,10%,-6%,and 19%?

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?

Today,you sold 200 shares of SLG,Inc.stock.Your total return on these shares is 12.5%.You purchased the shares one year ago at a price of $28.50 a share.You have received a total of $280 in dividends over the course of the year.What is your capital gains yield on this investment?

The excess return you earn by moving from a relatively risk-free investment to a risky investment is called the:

The average risk premium on U.S.Treasury bills over the period of 1926 to 2009 was _______%.

You purchased 100 shares of stock at a price of $35.72 per share.Over the last year,you have received total dividend income of $312.What is the dividend yield?

Six months ago,you purchased 100 shares of stock in ABC Co.at a price of $44.89 a share.ABC stock pays a quarterly dividend of $.15 a share.Today,you sold all of your shares for $46.23 per share.What is the total amount of your capital gains on this investment?

On average,for the period 1926 through 2009:

Over the period of 1926 through 2009,the annual rate of return on _____ has been more volatile than the annual rate of return on _____.

A stock had returns of 11%,1%,9%,15%,and -6% for the past five years.Based on these returns,what is the approximate probability that this stock will earn at least 23% in any one given year?

Introduction to Corporate Finance

Financial Statements Cash Flow

Financial Statements Analysis and Long-Term Planning

Discounted Cash Flow Valuation

Interest Rate 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 Capital Budgeting

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividend and Other Payouts

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

International Corporate Finance

Filters

Over the period of 1926 through 2009,the annual rate of return on _ has been more volatile than the annual rate of return on _.