Exam 1: A Brief History of Risk and Return

Over the past ten years, large-company stocks have returned an average of 11.6 percent annually, long-term corporate bonds have earned 6.4 percent, and U. S. Treasury bills have returned 3.2 percent. How much additional risk premium would you have earned if you had invested in large-company stocks rather than long-term corporate bonds over those ten years?

Eight months ago, you purchased 300 shares of a non-dividend paying stock for $27 a share. Today, you sold those shares for $31.59 a share. What was your annualized rate of return on this investment?

The arithmetic average return is the:

Black Stone Mines stock returned 8, 16, -8, and 12 percent over the past four years, respectively. What is the geometric average return?

BLOOM'S formula is used to:

You have owned a stock for seven years. The geometric average return on this investment for those seven years is positive even though the annual rates of return have varied significantly. Given this, you know the arithmetic average return for the period is:

Over the past four years, Sandstone Quarry stock produced returns of 12.6, 15.2, 9.8, and 2.7 percent, respectively. For the same time period, the risk-free rate 4.6, 5.2, 3.8, and 3.4 percent, respectively. What is the arithmetic average risk premium on this stock during these four years?

The rate of return earned on a U.S. Treasury bill is frequently used as a proxy for the:

A stock had year end prices of $24, $27, $32, and $26 over the past four years, respectively. What is the geometric average return?

The mean plus or minus one standard deviation defines the _____ percent probability range of a normal distribution.

The wider the distribution of an investment's returns over time, the _____ the expected average rate of return and the ______ the expected volatility of those returns.

Which one of the following statements is correct based on the historical returns for the period 1926-2009?

Which one of the following is considered the best method of comparing the returns on various- sized investments?

An asset has an average annual historical return of 11.6 percent and a standard deviation of 17.8 percent. What range of returns would you expect to see 95 percent of the time?

For the period 1926-2009, the annual return on large-company stocks:

The dividend yield is defined as the annual dividend expressed as a percentage of the:

You own a stock that has produced an arithmetic average return of 7.8 percent over the past five years. The annual returns for the first four years were 16, 11, -19, and 3 percent, respectively. What was the rate of return on the stock in year five?

The standard deviation is a measure of:

Over the past five years, an investment produced annual returns of 17, 22, -19, 3, and 15 percent, respectively. What is the geometric average return?

Over the past four years, Hi-Tech Development stock returned 36.1, 42.9, 15.4, and -33.2 percent annually. What is the arithmetic average return?