Question 1

The total percentage return on an equity investment typically has two components known as ___________ and ___________.

Accepted Answer

A)  Principal and interest. 
B)  Capital gains yield and dividend yield. 
C)  Arithmetic yield and geometric yield. 
D)  Dollar gain and capital gains. 
E)  Dividends and cash payments. 
A)  Principal and interest. 
B)  Capital gains yield and dividend yield. 
C)  Arithmetic yield and geometric yield. 
D)  Dollar gain and capital gains. 
E)  Dividends and cash payments.

Question 2

An initial investment of $10,000 twenty years ago is worth $119,379 today. What was the geometric average return per year over this 20-year period?

Accepted Answer

A)  10.5% 
B)  11.1% 
C)  11.7% 
D)  12.4% 
E)  13.2% 
A)  10.5% 
B)  11.1% 
C)  11.7% 
D)  12.4% 
E)  13.2%

Question 3

You purchased 100 shares of a stock at the beginning of the year for $43.20 per share. The share price at the end of the year is $46.10 and the stock paid an annual dividend of $1.10 per share. What was your dividend yield for the year?

Accepted Answer

A)  2.23% 
B)  2.39% 
C)  2.55% 
D)  2.67% 
E)  2.81% 
A)  2.23% 
B)  2.39% 
C)  2.55% 
D)  2.67% 
E)  2.81%

Question 4

An asset has annual returns of 14 percent, 8 percent, - 6 percent, 27 percent and 18 percent. What is the arithmetic return?

Accepted Answer

A)  11.64% 
B)  12.20% 
C)  13.05% 
D)  14.16% 
E)  15.25% 
A)  11.64% 
B)  12.20% 
C)  13.05% 
D)  14.16% 
E)  15.25%

Question 5

You own a stock has produced an average geometric return of 9.7% and an average arithmetic return of 11.4% over the past 18 years. What annual rate of returns should you expect to earn on this security over the next 6 years?

Accepted Answer

A)  11.04% 
B)  12.68% 
C)  13.01% 
D)  11.61% 
E)  10.90% 
A)  11.04% 
B)  12.68% 
C)  13.01% 
D)  11.61% 
E)  10.90%

Question 6

A stock has a return of 13.2 percent, and the risk-free rate is 4.6 percent. What is the risk premium for this stock?

Accepted Answer

A)  4.6% 
B)  6.4% 
C)  8.6% 
D)  13.2% 
E)  17.8% 
A)  4.6% 
B)  6.4% 
C)  8.6% 
D)  13.2% 
E)  17.8%

Question 7

A common measure of inflation is:

Accepted Answer

A)  Small company stock returns. 
B)  Treasury bills. 
C)  The Consumer Price Index. 
D)  The risk-free rate. 
E)  The standard deviation of stocks. 
A)  Small company stock returns. 
B)  Treasury bills. 
C)  The Consumer Price Index. 
D)  The risk-free rate. 
E)  The standard deviation of stocks.

Question 8

You own a stock with an average historical risk premium of 6.8%. The risk-free rate next year is expected to be 4.6%. What rate of return should you expect on your stock for next year?

Accepted Answer

A)  4.60% 
B)  11.38% 
C)  11.87% 
D)  11.40% 
E)  2.20% 
A)  4.60% 
B)  11.38% 
C)  11.87% 
D)  11.40% 
E)  2.20%

Question 9

Should we consider the capital gain as part of your return whether or not you have actually sold the security?

Accepted Answer

Since the capital gain is not a "paper"

Question 10

The standard deviation is a measure of:

Accepted Answer

A)  Volatility. 
B)  Return. 
C)  Performance. 
D)  Capital gains. 
E)  The risk premium. 
A)  Volatility. 
B)  Return. 
C)  Performance. 
D)  Capital gains. 
E)  The risk premium.

Question 11

A portfolio had an original value of $15,000 twenty years ago. The current value of the portfolio is $92,780. What was the geometric average return of the portfolio?

Accepted Answer

A)  8.63% 
B)  9.54% 
C)  10.81% 
D)  11.16% 
E)  11.87% 
A)  8.63% 
B)  9.54% 
C)  10.81% 
D)  11.16% 
E)  11.87%

Question 12

A stock has an arithmetic average return of 10.4% and a geometric average return of 8.8% based on the annual returns for the last 25 years. What is the best estimate of the annual return on this stock over the next 5 years?

Accepted Answer

A)  11.04% 
B)  12.68% 
C)  13.01% 
D)  10.13% 
E)  12.87% 
A)  11.04% 
B)  12.68% 
C)  13.01% 
D)  10.13% 
E)  12.87%

Question 13

A portfolio had a value of $50,000 ten years ago. If the average annual arithmetic return was 10.2 percent, what is the ending value of the portfolio?

Accepted Answer

A)  $120,406 
B)  $126,532 
C)  $132,064 
D)  $138,846 
E)  Insufficient information. 
A)  $120,406 
B)  $126,532 
C)  $132,064 
D)  $138,846 
E)  Insufficient information.

Question 14

If you multiply the number of shares outstanding stock for a firm by the price per share, you are looking for the firm's:

Accepted Answer

A)  Equity ratio 
B)  Total book value 
C)  Time value 
D)  Market capitalization 
E)  Leverage degree 
A)  Equity ratio 
B)  Total book value 
C)  Time value 
D)  Market capitalization 
E)  Leverage degree

Question 15

The geometric average return is the:

Accepted Answer

A)  Summation of the returns for a number of years divided by the nth root when n equal the number of years 
B)  Average compound return earned per year over a multi-year period 
C)  Compound total return for a period of years divided by the number of years in the period 
D)  Return earned in an average year over a multi-year period 
E)  Average squared return earned in a single year 
A)  Summation of the returns for a number of years divided by the nth root when n equal the number of years 
B)  Average compound return earned per year over a multi-year period 
C)  Compound total return for a period of years divided by the number of years in the period 
D)  Return earned in an average year over a multi-year period 
E)  Average squared return earned in a single year

Question 16

A Treasury bill with a face value of $1,000 is selling for $990. If this instrument matures in 30 days, what is its annualized return?

Accepted Answer

A)  11.04% 
B)  12.68% 
C)  13.01% 
D)  11.61% 
E)  12.87% 
A)  11.04% 
B)  12.68% 
C)  13.01% 
D)  11.61% 
E)  12.87%

Question 17

The Investment bubble, historically known as tulipmania easily arises when:

Accepted Answer

A)  Risky investments do not always pay more than risk-free investments. 
B)  Market is full of speculators. 
C)  Investors become irrational. 
D)  Manic buying and selling occur. 
E)  All of the above. 
A)  Risky investments do not always pay more than risk-free investments. 
B)  Market is full of speculators. 
C)  Investors become irrational. 
D)  Manic buying and selling occur. 
E)  All of the above.

Question 18

A stock has had returns of - 8 percent, 11 percent, 12 percent, 7 percent and 9 percent over the past five years. What is the variance of returns for this stock during the last five years?

Accepted Answer

A)  .019502 
B)  .000667 
C)  .028134 
D)  .031644 
E)  .034625 
A)  .019502 
B)  .000667 
C)  .028134 
D)  .031644 
E)  .034625

Question 19

In 2008, which of the following would have had the best overall return in the United States?

Accepted Answer

A)  A portfolio consisting of all stocks 
B)  A portfolio consisting of all bonds 
C)  A portfolio consisting of a mix of stocks and bonds 
D)  A portfolio that had diversified stocks 
E)  None of the above 
A)  A portfolio consisting of all stocks 
B)  A portfolio consisting of all bonds 
C)  A portfolio consisting of a mix of stocks and bonds 
D)  A portfolio that had diversified stocks 
E)  None of the above

Question 20

To invest in any financial instruments, you would like to check their:

Accepted Answer

A)  Percentage returns 
B)  Minimum returns 
C)  Maximum returns 
D)  Standard deviations of returns 
E)  All of the above 
A)  Percentage returns 
B)  Minimum returns 
C)  Maximum returns 
D)  Standard deviations of returns 
E)  All of the above

The total percentage return on an equity investment typically has two components known as _ and _.

An initial investment of $10,000 twenty years ago is worth $119,379 today. What was the geometric average return per year over this 20-year period?

You purchased 100 shares of a stock at the beginning of the year for $43.20 per share. The share price at the end of the year is $46.10 and the stock paid an annual dividend of $1.10 per share. What was your dividend yield for the year?

An asset has annual returns of 14 percent, 8 percent, - 6 percent, 27 percent and 18 percent. What is the arithmetic return?

You own a stock has produced an average geometric return of 9.7% and an average arithmetic return of 11.4% over the past 18 years. What annual rate of returns should you expect to earn on this security over the next 6 years?

A stock has a return of 13.2 percent, and the risk-free rate is 4.6 percent. What is the risk premium for this stock?

A common measure of inflation is:

You own a stock with an average historical risk premium of 6.8%. The risk-free rate next year is expected to be 4.6%. What rate of return should you expect on your stock for next year?

Should we consider the capital gain as part of your return whether or not you have actually sold the security?

The standard deviation is a measure of:

A portfolio had an original value of $15,000 twenty years ago. The current value of the portfolio is $92,780. What was the geometric average return of the portfolio?

A stock has an arithmetic average return of 10.4% and a geometric average return of 8.8% based on the annual returns for the last 25 years. What is the best estimate of the annual return on this stock over the next 5 years?

A portfolio had a value of $50,000 ten years ago. If the average annual arithmetic return was 10.2 percent, what is the ending value of the portfolio?

If you multiply the number of shares outstanding stock for a firm by the price per share, you are looking for the firm's:

The geometric average return is the:

A Treasury bill with a face value of $1,000 is selling for $990. If this instrument matures in 30 days, what is its annualized return?

The Investment bubble, historically known as tulipmania easily arises when:

A stock has had returns of - 8 percent, 11 percent, 12 percent, 7 percent and 9 percent over the past five years. What is the variance of returns for this stock during the last five years?

In 2008, which of the following would have had the best overall return in the United States?

To invest in any financial instruments, you would like to check their:

Diversification and Risky Asset Allocation

The Investment Process

Overview of Security Types

Mutual Funds

The Stock Market

Common Stock Valuation

Stock Price Behaviour and Market Efficiency

Behavioural Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Return, Risk and Security Management

Performance Evaluation and Risk Management

Options

Option Valuation

Futures Contracts

Projecting Cash Flow and Earnings

Corporate Bonds

Government Bonds and Mortgaged-Backed Securities

International Portfolio Investment

Filters

Exam 1: A Brief History of Risk and Return

The total percentage return on an equity investment typically has two components known as ___________ and ___________.

An initial investment of $10,000 twenty years ago is worth $119,379 today. What was the geometric average return per year over this 20-year period?

You purchased 100 shares of a stock at the beginning of the year for $43.20 per share. The share price at the end of the year is $46.10 and the stock paid an annual dividend of $1.10 per share. What was your dividend yield for the year?

An asset has annual returns of 14 percent, 8 percent, - 6 percent, 27 percent and 18 percent. What is the arithmetic return?

You own a stock has produced an average geometric return of 9.7% and an average arithmetic return of 11.4% over the past 18 years. What annual rate of returns should you expect to earn on this security over the next 6 years?

A stock has a return of 13.2 percent, and the risk-free rate is 4.6 percent. What is the risk premium for this stock?

A common measure of inflation is:

You own a stock with an average historical risk premium of 6.8%. The risk-free rate next year is expected to be 4.6%. What rate of return should you expect on your stock for next year?

Should we consider the capital gain as part of your return whether or not you have actually sold the security?

The standard deviation is a measure of:

A portfolio had an original value of $15,000 twenty years ago. The current value of the portfolio is $92,780. What was the geometric average return of the portfolio?

A stock has an arithmetic average return of 10.4% and a geometric average return of 8.8% based on the annual returns for the last 25 years. What is the best estimate of the annual return on this stock over the next 5 years?

A portfolio had a value of $50,000 ten years ago. If the average annual arithmetic return was 10.2 percent, what is the ending value of the portfolio?

If you multiply the number of shares outstanding stock for a firm by the price per share, you are looking for the firm's:

The geometric average return is the:

A Treasury bill with a face value of $1,000 is selling for $990. If this instrument matures in 30 days, what is its annualized return?

The Investment bubble, historically known as tulipmania easily arises when:

A stock has had returns of - 8 percent, 11 percent, 12 percent, 7 percent and 9 percent over the past five years. What is the variance of returns for this stock during the last five years?

In 2008, which of the following would have had the best overall return in the United States?

To invest in any financial instruments, you would like to check their:

Diversification and Risky Asset Allocation

The Investment Process

Overview of Security Types

Mutual Funds

The Stock Market

Common Stock Valuation

Stock Price Behaviour and Market Efficiency

Behavioural Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Return, Risk and Security Management

Performance Evaluation and Risk Management

Options

Option Valuation

Futures Contracts

Projecting Cash Flow and Earnings

Corporate Bonds

Government Bonds and Mortgaged-Backed Securities

International Portfolio Investment

Filters

The total percentage return on an equity investment typically has two components known as _ and _.