Exam 4: Return and Risk

Most investors are risk-averse, which means they

When calculating the present value of either a future single sum or a future annuity, the applicable interest rate is usually called the

Josh purchased 100 shares of XOM at the beginning of 2007. He received dividends per share of $1.37 (2007), $1.55 (2008), $1.66 (2009), $1.74 (2010), $1.85 (2011). At the end of 2011, just after receiving the last dividend, he sold the stock for $84.76. At what rate did the dividends from the end of 2007 to the end of 2011? Assume that all dividends were received at the end of the year.

Inflation tends to have a favorable impact on

One reason that the holding period return should not be used to compare long-term investments is that it does not consider the time value of money.

For a given stated rate of interest, a sum compounded monthly will earn more interest than a sum compounded annually.

The required return on a risky investment includes a real rate of return, an inflation premium and a risk premium.

Which one of the following will tend to decrease the rate of return on an investment?

The adage "the sooner one receives a return on a given investment, the better," reflects the financial concept known as the

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.

Which one of the following statements is correct concerning the time value of money?

An ordinary annuity has cash flows that occur at the ________ of each time period and are ________ in amount.

In the short term, stock prices tend to rise as inflation rises.

An investment paying 4% compounded quarterly will have a value at the end of one year equal to

An investment that has earned a high rate of return over the last 5 years will not necessarily continue to perform well in the future.

Which of the following statements about the standard deviation are correct? I. The standard deviation is a measure of relative dispersion. II. Standard deviations should be in conjunction with expected returns to compare investments. III. The standard deviation is calculated by taking the square root of the variance. IV. The higher the standard deviation of an investment, the lower its risk.

Which of the following internal characteristics should cause investors to expect the highest rate of return?

Which types of risk can not be avoided by carefully researching a company's business prospects and financial statements?

The following investment cash flows have been entered into cells B5 through B9 of an EXCEL spreadsheet. B5 $(5,200 ), B6 $2,100, B7 $1,300, B8 $1,800, B9 $1,200, where $5,200 is the cost of the investment and the following amounts are cash flows at the end of years one through four. The correct function for computing the yield on this investment is

Kelly bought a stock at a price of $22.50. She received a $1.75 dividend and sold the stock for $24.75. What is Kelly's capital gain on this investment?