Question 1

The average squared difference between the actual return and the average return is called the:

Accepted Answer

A) excess return. 
B) risk premium. 
C) standard deviation. 
D) variance. 
E) volatility return 
A) excess return. 
B) risk premium. 
C) standard deviation. 
D) variance. 
E) volatility return

Question 2

If the expected return on the market is 11.5%,then using the historical risk premium on large stocks of 8.6%,the current risk-free rate is:

Accepted Answer

A) 2.9% 
B) 7.4% 
C) 8.4% 
D) 10.6% 
E) 12.6% 
A) 2.9% 
B) 7.4% 
C) 8.4% 
D) 10.6% 
E) 12.6%

Question 3

A year ago,you purchased 300 shares of IXC Technologies,Inc.stock at a price of $9.05 per share.The stock pays an annual dividend of $.12 per share.Today,you sold all of your shares for $29.14 per share.What is your total dollar return on this investment?

Accepted Answer

A) $5,703 
B) $6,063 
C) $6,453 
D) $6,563 
E) $6,603 
A) $5,703 
B) $6,063 
C) $6,453 
D) $6,563 
E) $6,603

Question 4

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

Accepted Answer

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

Question 5

What is the difference between arithmetic average and geometric mean?
 Is one better than the other to use in financial analysis?

Accepted Answer

The arithmetic average tells you what yo

Question 6

The total annual returns on large company common stocks averaged 11.8% from 1926 to 2009 small company stocks averaged 16.6%,long-term government bonds averaged 5.8%,while Treasury Bills averaged 3.7%.What was the average risk premium earned by long-term government bonds and small company stocks,respectively?

Accepted Answer

A) 1.8%; 11.9% 
B) 2.1%; 12.9% 
C) 4.4%; 13.9% 
D) 9.5%; 1.8% 
E) None of the above. 
A) 1.8%; 11.9% 
B) 2.1%; 12.9% 
C) 4.4%; 13.9% 
D) 9.5%; 1.8% 
E) None of the above.

Question 7

Which one of the following is a correct ranking of securities based on their volatility over the period of 1926 to 2009? Rank from highest to lowest.

Accepted Answer

A) Small company stocks, long-term corporate bonds, large company stocks 
B) Large company stocks, U.S.Treasury bills, long-term government bonds 
C) Small company stocks, long-term government bonds, long-term corporate bonds 
D) Long-term corporate bonds, large company stocks, U.S.Treasury bills 
E) Small company stocks, large company stocks, long-term government bonds 
A) Small company stocks, long-term corporate bonds, large company stocks 
B) Large company stocks, U.S.Treasury bills, long-term government bonds 
C) Small company stocks, long-term government bonds, long-term corporate bonds 
D) Long-term corporate bonds, large company stocks, U.S.Treasury bills 
E) Small company stocks, large company stocks, long-term government bonds

Question 8

Eight months ago,you purchased 400 shares of Winston,Inc.stock at a price of $56.90 a share.To date the company has paid quarterly dividends of $.55 a share twice.Today,you sold all of your shares for $49.40 a share.What is your total percentage return on this investment?

Accepted Answer

A) -11.2% 
B) -9.3% 
C) -8.4% 
D) 12.0% 
E) 13.4% 
A) -11.2% 
B) -9.3% 
C) -8.4% 
D) 12.0% 
E) 13.4%

Question 9

What are the arithmetic and geometric average returns for a stock with annual returns of 21%,8%,-32%,41%,and 5%?

Accepted Answer

A) 5.6%; 8.6% 
B) 5.6%; 6.3% 
C) 8.6%; 5.6% 
D) 8.8%; 6.1% 
E) 8.6%; 6.3% 
A) 5.6%; 8.6% 
B) 5.6%; 6.3% 
C) 8.6%; 5.6% 
D) 8.8%; 6.1% 
E) 8.6%; 6.3%

Question 10

The market portfolio of common stocks earned 11.3% in one year.Treasury bills earned 3.1%.What was the real risk premium on equities?

Accepted Answer

A) 2.90% 
B) 3.25% 
C) 3.57% 
D) 8.20% 
E) 14.40% 
A) 2.90% 
B) 3.25% 
C) 3.57% 
D) 8.20% 
E) 14.40%

Question 11

The return on your portfolio over the last 5 years were -5%,20%,0%,10% and 5%.What is the standard deviation of your return?

Accepted Answer

A) 2.74% 
B) 5.21% 
C) 9.62% 
D) 10.12% 
E) 12.70% 
A) 2.74% 
B) 5.21% 
C) 9.62% 
D) 10.12% 
E) 12.70%

Question 12

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

Accepted Answer

A) 5.0% 
B) 6.0% 
C) 7.5% 
D) 8.0% 
E) 10.0% 
A) 5.0% 
B) 6.0% 
C) 7.5% 
D) 8.0% 
E) 10.0%

Question 13

Based on the period of 1926 through 2009,_____ have tended to outperform other securities over the long-term.

Accepted Answer

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

Question 14

The variance of returns 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 15

The excess return required from a risky asset over that required from a risk-free asset is called the:

Accepted Answer

A) risk premium. 
B) geometric premium. 
C) excess return. 
D) average return. 
E) variance. 
A) risk premium. 
B) geometric premium. 
C) excess return. 
D) average return. 
E) variance.

Question 16

You just sold 200 shares of Langley,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?

Accepted Answer

A) -$550 
B) -$222 
C) -$3 
D) $550 
E) $878 
A) -$550 
B) -$222 
C) -$3 
D) $550 
E) $878

Question 17

Six months ago,you purchased 1,200 shares of ABC stock for $21.20 a share.You have received dividend payments equal to $.60 a share.Today,you sold all of your shares for $22.20 a share.What is your total dollar return on this investment?

Accepted Answer

A) $720 
B) $1,200 
C) $1,440 
D) $1,920 
E) $3,840 
A) $720 
B) $1,200 
C) $1,440 
D) $1,920 
E) $3,840

Question 18

What securities have offered the highest average annual returns over the last several decades?
 Can we conclude that return and risk are related in real life?

Accepted Answer

The purpose of this question is to check

Question 19

The return pattern on your favorite stock has been 5%,8%,-12%,15%,21% over the last five years.What was your average return and holding period return over the last 5 years?

Accepted Answer

A) 4.5%; 6.5% 
B) 7.4%; 38.9% 
C) 7.4%; 7.76% 
D) 7.4%; 76.73% 
E) None of the above. 
A) 4.5%; 6.5% 
B) 7.4%; 38.9% 
C) 7.4%; 7.76% 
D) 7.4%; 76.73% 
E) None of the above.

Question 20

The long term inflation rate average was 2.7% and you invested in long term corporate bonds over the same period which earned 5.8%.What was the average risk premium you earned?

Accepted Answer

A) 3.1% 
B) 3.7% 
C) 9.5% 
D) 9.9% 
E) None of the above. 
A) 3.1% 
B) 3.7% 
C) 9.5% 
D) 9.9% 
E) None of the above.

The average squared difference between the actual return and the average return is called the:

If the expected return on the market is 11.5%,then using the historical risk premium on large stocks of 8.6%,the current risk-free rate is:

A year ago,you purchased 300 shares of IXC Technologies,Inc.stock at a price of $9.05 per share.The stock pays an annual dividend of $.12 per share.Today,you sold all of your shares for $29.14 per share.What is your total dollar return on this investment?

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

What is the difference between arithmetic average and geometric mean? Is one better than the other to use in financial analysis?

Which one of the following is a correct ranking of securities based on their volatility over the period of 1926 to 2009? Rank from highest to lowest.

Eight months ago,you purchased 400 shares of Winston,Inc.stock at a price of $56.90 a share.To date the company has paid quarterly dividends of $.55 a share twice.Today,you sold all of your shares for $49.40 a share.What is your total percentage return on this investment?

What are the arithmetic and geometric average returns for a stock with annual returns of 21%,8%,-32%,41%,and 5%?

The market portfolio of common stocks earned 11.3% in one year.Treasury bills earned 3.1%.What was the real risk premium on equities?

The return on your portfolio over the last 5 years were -5%,20%,0%,10% and 5%.What is the standard deviation of your return?

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

Based on the period of 1926 through 2009,_____ have tended to outperform other securities over the long-term.

The variance of returns is computed by dividing the sum of the:

The excess return required from a risky asset over that required from a risk-free asset is called the:

You just sold 200 shares of Langley,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?

Six months ago,you purchased 1,200 shares of ABC stock for $21.20 a share.You have received dividend payments equal to $.60 a share.Today,you sold all of your shares for $22.20 a share.What is your total dollar return on this investment?

What securities have offered the highest average annual returns over the last several decades? Can we conclude that return and risk are related in real life?

The return pattern on your favorite stock has been 5%,8%,-12%,15%,21% over the last five years.What was your average return and holding period return over the last 5 years?

The long term inflation rate average was 2.7% and you invested in long term corporate bonds over the same period which earned 5.8%.What was the average risk premium you earned?

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 average squared difference between the actual return and the average return is called the:

If the expected return on the market is 11.5%,then using the historical risk premium on large stocks of 8.6%,the current risk-free rate is:

A year ago,you purchased 300 shares of IXC Technologies,Inc.stock at a price of $9.05 per share.The stock pays an annual dividend of $.12 per share.Today,you sold all of your shares for $29.14 per share.What is your total dollar return on this investment?

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

What is the difference between arithmetic average and geometric mean? Is one better than the other to use in financial analysis?

Which one of the following is a correct ranking of securities based on their volatility over the period of 1926 to 2009? Rank from highest to lowest.

Eight months ago,you purchased 400 shares of Winston,Inc.stock at a price of $56.90 a share.To date the company has paid quarterly dividends of $.55 a share twice.Today,you sold all of your shares for $49.40 a share.What is your total percentage return on this investment?

What are the arithmetic and geometric average returns for a stock with annual returns of 21%,8%,-32%,41%,and 5%?

The market portfolio of common stocks earned 11.3% in one year.Treasury bills earned 3.1%.What was the real risk premium on equities?

The return on your portfolio over the last 5 years were -5%,20%,0%,10% and 5%.What is the standard deviation of your return?

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

Based on the period of 1926 through 2009,_____ have tended to outperform other securities over the long-term.

The variance of returns is computed by dividing the sum of the:

The excess return required from a risky asset over that required from a risk-free asset is called the:

You just sold 200 shares of Langley,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?

Six months ago,you purchased 1,200 shares of ABC stock for $21.20 a share.You have received dividend payments equal to $.60 a share.Today,you sold all of your shares for $22.20 a share.What is your total dollar return on this investment?

What securities have offered the highest average annual returns over the last several decades? Can we conclude that return and risk are related in real life?

The return pattern on your favorite stock has been 5%,8%,-12%,15%,21% over the last five years.What was your average return and holding period return over the last 5 years?

The long term inflation rate average was 2.7% and you invested in long term corporate bonds over the same period which earned 5.8%.What was the average risk premium you earned?

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