Exam 4: Return and Risk

The yield is the rate of return that causes a project to have a zero net present value.

Historically, the real rate of return in the United States has tended to be

A holding period return is calculated by adding the current income to the capital gains and dividing this sum by the

When the rate of return is equal to the discount rate

Investments with lower standard deviations can be expected to produce higher rates of return.

The yield on an investment is equal to its internal rate of return.

The risk that the rate of return on an investment will be less than expected due to factors that are independent of the investment, such as political, social or economic events, is called

An investment produced annual rates of return of 4%, 8%, 14% and 6%, respectively, over the past four years.What is the standard deviation of these returns?

The greater the dispersion around an asset's expected return, the greater the risk.

To calculate the interest rate or growth rate using a spreadsheet or financial calculator, the present value and the future value most have opposite signs.

If you invest $2,000 at the end of each year for five years and you earn 7% interest compounded annually, how much will you have accumulated at the end of the fifth year?

Over the long term, which one of the following has historically had the lowest average annual rate of return?

Samantha bought a stock one year ago for $66 a share.She received a total of $2.00 in dividends.Today she sold the stock for $70 a share.Which one of the following statements is correct concerning this investment?

To compute the present value of $1,000 annuity received at the end of each of the next three years and discounted at the rate of 5% per year, you should use he following EXCEL command.

Liquidity risk is defined as the risk of

Ashley purchased a stock at a price of $27 a share.She received quarterly dividends of $0.75 per share.After one year, Ashley sold the stock at a price of $29.25 a share.What is her percentage total return on this investment?

The return that fully compensates for the risk of an investment is called the risk-free rate of return.

The holding period is a useful way to compare investments because it considers

Between 1926 and 2005, the return on small company stocks on average exceeded the return on large company stocks.

Justin invests $4,000 in a savings account for two years.The account pays 2% interest compounded annually.How much interest income will Justin earn on this investment?