Question 1

Aztec Movers pays a constant annual dividend of $1.55 per share on its stock. Last year at this time, the market rate of return on this stock was 14.8 percent. Today, the market rate has fallen to 11.2 percent. What would your capital gains yield have been if you had purchased this stock one year ago and then sold the stock today?

Accepted Answer

A)   18.78 percent
B)   22.03 percent
C)   28.16 percent
D)   30.00 percent
E)   32.14 percentF) A) and E)
G) D) and E)

Question 2

You bought a share of 6.5 percent preferred stock for $87.40 last year. The market price for your stock is now $88.10. What is your total return for last year?

Accepted Answer

A)   7.51 percent
B)   7.73 percent
C)   7.86 percent
D)   8.19 percent
E)   8.24 percentF) C) and D)
G) A) and B) E

Question 3

Your portfolio has provided you with returns of 8.6 percent, 14.2 percent, -3.7 percent, and 11.4 percent over the past four years, respectively. What is the geometric average return for this period?

Accepted Answer

A)   7.25 percent
B)   7.40 percent
C)   7.57 percent
D)   7.63 percent
E)   7.78 percentF) B) and D)
G) A) and B)

Question 4

Over the past six years, a stock had annual returns of 14 percent, -3 percent, 8 percent, 21 percent, -16 percent, and 4 percent, respectively. What is the standard deviation of these returns?

Accepted Answer

A)   11.27 percent
B)   13.05 percent
C)   13.59 percent
D)   15.08 percent
E)   14.40 percentF) B) and E)
G) A) and D)

Question 5

Which one of the following categories has the widest frequency distribution of returns for the period 1926-2008?

Accepted Answer

A)   Small-company stocks
B)   U.S. Treasury bills
C)   Long-term government bonds
D)   Inflation
E)   Large-company stockF) A) and E)
G) C) and D)

Question 6

The rate of return on which one of the following is used as the risk-free rate?

Accepted Answer

A)   Long-term government bonds
B)   Long-term corporate bonds
C)   Inflation, as measured by the Consumer Price Index
D)   U.S. Treasury bill
E)   Large-company stocksF) A) and C)
G) C) and D)

Question 7

You purchased 1,300 shares of LKL stock 5 years ago and have earned annual returns of 7.1 percent, 11.2 percent, 3.6 percent, -4.7 percent and 11.8 percent. What is your arithmetic average return?

Accepted Answer

A)   4.47 percent
B)   5.80 percent
C)   6.23 percent
D)   6.47 percent
E)   6.98 percentF) B) and E)
G) A) and D)

Question 8

For the period 1926-2008, which one of the following had the smallest risk premium?

Accepted Answer

A)   Large-company stocks
B)   Small-company stocks
C)   Long-term corporate bonds
D)   U.S. Treasury bills
E)   Long-term government bondsF) None of the above
G) C) and E) D

Question 9

The variance is the average squared difference between which of the following?

Accepted Answer

A)   Actual return and average return
B)   Actual return and (average return/N - 1) 
C)   Actual return and the real return
D)   Average return and the standard deviation
E)   Actual return and the risk-free rateF) A) and D)
G) A) and C)

Question 10

Suppose you bought a 6 percent coupon bond one year ago for $929. The bond sells today for $933. The face value is $1,000. If the inflation rate last year was 3.4 percent, what was your total real rate of return on this investment?

Accepted Answer

A)   3.37 percent
B)   3.92 percent
C)   4.31 percent
D)   6.89 percent
E)   7.08 percentF) C) and D)
G) A) and B)

Question 11

Assume that long-term corporate bonds had an average return of 6.3 percent and a standard deviation of 8.3 percent for a 30-year period. What range of returns would you expect to see on these bonds 68 percent of the time?

Accepted Answer

A)   -2.0 percent to 14.6 percent
B)   -2.0 percent to 22.9 percent
C)   -10.3 percent to 14.6 percent
D)   -10.3 percent to 17.4 percent
E)   -10.3 percent to 22.9 percentF) A) and B)
G) C) and E)

Question 12

Over the period of 1926-2008:

Accepted Answer

A)   long-term government bonds underperformed long-term corporate bonds.
B)   small-company stocks underperformed large-company stocks.
C)   inflation exceeded the rate of return on U.S. Treasury bills.
D)   U.S. Treasury bills outperformed long-term government bonds.
E)   large-company stocks outperformed all other investment categories.F) C) and D)
G) B) and D)

Question 13

Over the period of 1926-2008, which one of the following investment classes had the highest volatility of returns?

Accepted Answer

A)   Large-company stocks
B)   U.S. Treasury bills
C)   Small-company stocks
D)   Long-term corporate bonds
E)   Long-term government bondsF) C) and E)
G) A) and B) C

Question 14

Semi-strong form market efficiency states that the value of a security is based on:

Accepted Answer

A)   all public and private information.
B)   historical information only.
C)   all publicly available information.
D)   all publicly available information plus any data that can be gathered from insider trading.
E)   random information with no clear distinction as to the source of that information.F) D) and E)
G) A) and B)

Question 15

Which one of the following had the lowest standard deviation of returns for the period of 1926 - 2008?

Accepted Answer

A)   U.S. Treasury bill
B)   Inflation
C)   Long-term corporate bonds
D)   Large-company stocks
E)   Long-term government bondsF) A) and E)
G) A) and B)

Question 16

One year ago, you purchased a 6 percent coupon bond with a face value of $1,000 when it was selling for 101.2 percent of par. Today, you sold this bond for 99.8 percent of par. What is your total dollar return on this investment?

Accepted Answer

A)   $46
B)   $60
C)   $67
D)   $74
E)   $82F) All of the above
G) B) and D)

Question 17

Over the period of 1926-2008, U. S. Treasury bills had an average return of 3.8 percent while inflation averaged 3.1 percent. Based on this historical record, is it safe to assume that an investor in U.S. Treasury bills will enjoy a positive real rate of return each year? Why or why not?

Accepted Answer

No. While U.S. Treasury bills had positi...

Question 18

One year ago, Theresa purchased 600 shares of Outland Co. stock for $3,600. The stock does not pay any regular dividends but it did pay a special dividend of $0.25 a share last week. This morning, she sold her shares for $7.25 a share. What was the total return on this investment?

Accepted Answer

A)   18.00 percent
B)   20.83 percent
C)   22.50 percent
D)   25.00 percent
E)   27.33 percentF) A) and B)
G) A) and C)

Question 19

The stock of Turner United is priced at $46 a share and has a dividend yield of 2.1 percent. The firm pays constant annual dividends. What is the amount of the next dividend per share?

Accepted Answer

A)   $0.021
B)   $0.210
C)   $0.966
D)   $0.096
E)   $0.219F) C) and E)
G) A) and B)

Question 20

Kelly decided to accept the risk and purchased a high growth stock. Her returns for the past five years are 48 percent, 39 percent, -56 percent, 61 percent, and -24 percent. What is the standard deviation of these returns?

Accepted Answer

A)   43.20 percent
B)   45.46 percent
C)   47.88 percent
D)   50.83 percent
E)   58.39 percentF) All of the above
G) A) and B)

Exam 10: Some Lessons From Capital Market History

Correct Answer
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You bought a share of 6.5 percent preferred stock for $87.40 last year. The market price for your stock is now $88.10. What is your total return for last year?

Correct Answer
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E

Your portfolio has provided you with returns of 8.6 percent, 14.2 percent, -3.7 percent, and 11.4 percent over the past four years, respectively. What is the geometric average return for this period?

Correct Answer
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Over the past six years, a stock had annual returns of 14 percent, -3 percent, 8 percent, 21 percent, -16 percent, and 4 percent, respectively. What is the standard deviation of these returns?

Correct Answer
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Which one of the following categories has the widest frequency distribution of returns for the period 1926-2008?

Correct Answer
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The rate of return on which one of the following is used as the risk-free rate?

Correct Answer
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You purchased 1,300 shares of LKL stock 5 years ago and have earned annual returns of 7.1 percent, 11.2 percent, 3.6 percent, -4.7 percent and 11.8 percent. What is your arithmetic average return?

Correct Answer
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For the period 1926-2008, which one of the following had the smallest risk premium?

Correct Answer
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D

The variance is the average squared difference between which of the following?

Correct Answer
verified

Suppose you bought a 6 percent coupon bond one year ago for $929. The bond sells today for $933. The face value is $1,000. If the inflation rate last year was 3.4 percent, what was your total real rate of return on this investment?

Correct Answer
verified

Assume that long-term corporate bonds had an average return of 6.3 percent and a standard deviation of 8.3 percent for a 30-year period. What range of returns would you expect to see on these bonds 68 percent of the time?

Correct Answer
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Over the period of 1926-2008:

Correct Answer
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Over the period of 1926-2008, which one of the following investment classes had the highest volatility of returns?

Correct Answer
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C

Semi-strong form market efficiency states that the value of a security is based on:

Correct Answer
verified

Which one of the following had the lowest standard deviation of returns for the period of 1926 - 2008?

Correct Answer
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One year ago, you purchased a 6 percent coupon bond with a face value of $1,000 when it was selling for 101.2 percent of par. Today, you sold this bond for 99.8 percent of par. What is your total dollar return on this investment?

Correct Answer
verified

Over the period of 1926-2008, U. S. Treasury bills had an average return of 3.8 percent while inflation averaged 3.1 percent. Based on this historical record, is it safe to assume that an investor in U.S. Treasury bills will enjoy a positive real rate of return each year? Why or why not?

Correct Answer
verified
No. While U.S. Treasury bills had positi...
View Answer

One year ago, Theresa purchased 600 shares of Outland Co. stock for $3,600. The stock does not pay any regular dividends but it did pay a special dividend of $0.25 a share last week. This morning, she sold her shares for $7.25 a share. What was the total return on this investment?

Correct Answer
verified

The stock of Turner United is priced at $46 a share and has a dividend yield of 2.1 percent. The firm pays constant annual dividends. What is the amount of the next dividend per share?

Correct Answer
verified

Kelly decided to accept the risk and purchased a high growth stock. Her returns for the past five years are 48 percent, 39 percent, -56 percent, 61 percent, and -24 percent. What is the standard deviation of these returns?

Correct Answer
verified

Exam 10: Some Lessons From Capital Market History

Correct AnswerverifiedShow Answer

You bought a share of 6.5 percent preferred stock for $87.40 last year. The market price for your stock is now $88.10. What is your total return for last year?

Correct AnswerverifiedE

Your portfolio has provided you with returns of 8.6 percent, 14.2 percent, -3.7 percent, and 11.4 percent over the past four years, respectively. What is the geometric average return for this period?

Correct AnswerverifiedShow Answer

Over the past six years, a stock had annual returns of 14 percent, -3 percent, 8 percent, 21 percent, -16 percent, and 4 percent, respectively. What is the standard deviation of these returns?

Correct AnswerverifiedShow Answer

Which one of the following categories has the widest frequency distribution of returns for the period 1926-2008?

Correct AnswerverifiedShow Answer

The rate of return on which one of the following is used as the risk-free rate?

Correct AnswerverifiedShow Answer

You purchased 1,300 shares of LKL stock 5 years ago and have earned annual returns of 7.1 percent, 11.2 percent, 3.6 percent, -4.7 percent and 11.8 percent. What is your arithmetic average return?

Correct AnswerverifiedShow Answer

For the period 1926-2008, which one of the following had the smallest risk premium?

Correct AnswerverifiedD

The variance is the average squared difference between which of the following?

Correct AnswerverifiedShow Answer

Suppose you bought a 6 percent coupon bond one year ago for $929. The bond sells today for $933. The face value is $1,000. If the inflation rate last year was 3.4 percent, what was your total real rate of return on this investment?

Correct AnswerverifiedShow Answer

Assume that long-term corporate bonds had an average return of 6.3 percent and a standard deviation of 8.3 percent for a 30-year period. What range of returns would you expect to see on these bonds 68 percent of the time?

Correct AnswerverifiedShow Answer

Over the period of 1926-2008:

Correct AnswerverifiedShow Answer

Over the period of 1926-2008, which one of the following investment classes had the highest volatility of returns?

Correct AnswerverifiedC

Semi-strong form market efficiency states that the value of a security is based on:

Correct AnswerverifiedShow Answer

Which one of the following had the lowest standard deviation of returns for the period of 1926 - 2008?

Correct AnswerverifiedShow Answer

One year ago, you purchased a 6 percent coupon bond with a face value of $1,000 when it was selling for 101.2 percent of par. Today, you sold this bond for 99.8 percent of par. What is your total dollar return on this investment?

Correct AnswerverifiedShow Answer

Over the period of 1926-2008, U. S. Treasury bills had an average return of 3.8 percent while inflation averaged 3.1 percent. Based on this historical record, is it safe to assume that an investor in U.S. Treasury bills will enjoy a positive real rate of return each year? Why or why not?

Correct AnswerverifiedNo. While U.S. Treasury bills had positi...View AnswerShow Answer

One year ago, Theresa purchased 600 shares of Outland Co. stock for $3,600. The stock does not pay any regular dividends but it did pay a special dividend of $0.25 a share last week. This morning, she sold her shares for $7.25 a share. What was the total return on this investment?

Correct AnswerverifiedShow Answer

The stock of Turner United is priced at $46 a share and has a dividend yield of 2.1 percent. The firm pays constant annual dividends. What is the amount of the next dividend per share?

Correct AnswerverifiedShow Answer

Kelly decided to accept the risk and purchased a high growth stock. Her returns for the past five years are 48 percent, 39 percent, -56 percent, 61 percent, and -24 percent. What is the standard deviation of these returns?

Correct AnswerverifiedShow Answer

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E

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D

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C

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No. While U.S. Treasury bills had positi...
View Answer

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