Question 1

A stock had returns of 11 percent,-18 percent,-21 percent,20 percent,and 34 percent over the past five years.What is the standard deviation of these returns?

Accepted Answer

A)  18.74 percent
B)  20.21 percent
C)  20.68 percent
D)  24.01 percent
E)  23.49 percentF) A) and B)
G) All of the above

Question 2

Which one of the following categories of securities had the highest average return for the period 1926-2010?

Accepted Answer

A)  U.S.Treasury bills
B)  large company stocks
C)  small company stocks
D)  long-term corporate bonds
E)  long-term government bondsF) A) and D)
G) A) and C)

Question 3

One year ago,you purchased 150 shares of a stock at a price of $54.18 a share.Today,you sold those shares for $40.25 a share.During the past year,you received total dividends of $182 while inflation averaged 4.2 percent.What is your approximate real rate of return on this investment?

Accepted Answer

A)  -24.20 percent
B)  -27.67 percent
C)  -20.00 percent
D)  20.00 percent
E)  24.20 percentF) A) and E)
G) None of the above

Question 4

A stock has an expected rate of return of 13 percent and a standard deviation of 21 percent.Which one of the following best describes the probability that this stock will lose at least half of its value in any one given year?

Accepted Answer

A)  0.1 percent
B)  0.5 percent
C)  1.0 percent
D)  2.5 percent
E)  5.0 percentF) A) and E)
G) A) and C)

Question 5

One year ago,you purchased a stock at a price of $47.50 a share.Today,you sold the stock and realized a total loss of 22.11 percent.Your capital gain was -$12.70 a share.What was your dividend yield?

Accepted Answer

A)  4.63 percent
B)  4.88 percent
C)  5.02 percent
D)  12.67 percent
E)  14.38 percentF) A) and E)
G) B) and D)

Question 6

Calculate the standard deviation of the following rates of return:

Accepted Answer

A)  10.79 percent
B)  12.60 percent
C)  13.48 percent
D)  14.42 percent
E)  15.08 percentF) B) and E)
G) A) and D)

Question 7

Which one of the following correctly describes the dividend yield?

Accepted Answer

A)  next year's annual dividend divided by today's stock price
B)  this year's annual dividend divided by today's stock price
C)  this year's annual dividend divided by next year's expected stock price
D)  next year's annual dividend divided by this year's annual dividend
E)  the increase in next year's dividend over this year's dividend divided by this year's dividendF) A) and E)
G) B) and D)

Question 8

Which of the following correspond to a wide frequency distribution?
I.relatively low risk
II.relatively low rate of return
III.relatively high standard deviation
IV.relatively large risk premium

Accepted Answer

A)  II only
B)  III only
C)  I and II only
D)  II and III only
E)  III and IV onlyF) All of the above
G) D) and E)

Question 9

The average compound return earned per year over a multi-year period is called the _____ average return.

Accepted Answer

A)  arithmetic
B)  standard
C)  variant
D)  geometric
E)  realF) B) and D)
G) A) and E)

Question 10

Which of the following statements are true based on the historical record for 1926-2010?
I.Risk and potential reward are inversely related.
II.Risk-free securities produce a positive real rate of return each year.
III.Returns are more predictable over the short-term than they are over the long-term.
IV.Bonds are generally a safer investment than are stocks.

Accepted Answer

A)  I only
B)  IV only
C)  II and III only
D)  II and IV only
E)  II, III, and IV onlyF) B) and C)
G) All of the above

Question 11

If you excel in analyzing the future outlook of firms,you would prefer the financial markets be ____ form efficient so that you can have an advantage in the marketplace.

Accepted Answer

A)  weak
B)  semiweak
C)  semistrong
D)  strong
E)  perfectF) D) and E)
G) A) and D)

Question 12

Which one of the following is a correct ranking of securities based on their volatility over the period of 1926-2010? Rank from highest to lowest.

Accepted Answer

A)  large company stocks, U.S.Treasury bills, long-term government bonds
B)  small company stocks, long-term corporate bonds, large company stocks
C)  small company stocks, long-term corporate bonds, intermediate-term government bonds
D)  large company stocks, small company stocks, long-term government bonds
E)  intermediate-term government bonds, long-term corporate bonds, U.S.Treasury billsF) A) and E)
G) A) and C)

Question 13

Which of the following statements is correct in relation to a stock investment?
I.The capital gains yield can be positive,negative,or zero.
II.The dividend yield can be positive,negative,or zero.
III.The total return can be positive,negative,or zero.
IV.Neither the dividend yield nor the total return can be negative.

Accepted Answer

A)  I only
B)  I and II only
C)  I and III only
D)  I and IV only
E)  IV onlyF) B) and E)
G) C) and D)

Question 14

A stock has a geometric average return of 14.6 percent and an arithmetic average return of 15.5 percent based on the last 33 years.What is the estimated average rate of return for the next 6 years based on Blume's formula?

Accepted Answer

A)  14.79 percent
B)  14.96 percent
C)  15.28 percent
D)  15.36 percent
E)  15.42 percentF) All of the above
G) A) and E)

Question 15

What is the probability that small-company stocks will produce an annual return that is more than one standard deviation below the average?

Accepted Answer

A)  1.0 percent
B)  2.5 percent
C)  5.0 percent
D)  16 percent
E)  32 percentF) All of the above
G) B) and D)

Question 16

Which one of the following statements best defines the efficient market hypothesis?

Accepted Answer

A)  Efficient markets limit competition.
B)  Security prices in efficient markets remain steady as new information becomes available.
C)  Mispriced securities are common in efficient markets.
D)  All securities in an efficient market are zero net present value investments.
E)  Profits are removed as a market incentive when markets become efficient.F) All of the above
G) A) and E)

Question 17

Six months ago,you purchased 100 shares of stock in Global Trading at a price of $38.70 a share.The stock pays a quarterly dividend of $0.15 a share.Today,you sold all of your shares for $40.10 per share.What is the total amount of your dividend income on this investment?

Accepted Answer

A)  $15
B)  $30
C)  $45
D)  $50
E)  $60F) A) and E)
G) B) and D)

Question 18

The historical record for the period 1926-2010 supports which one of the following statements?

Accepted Answer

A)  A higher-risk security will provide a higher rate of return next year than will a lower-risk security.
B)  If you need a stated amount of money next year, your best investment option today for those funds would be long-term government bonds.
C)  Increased long-run potential returns are obtained by lowering risks.
D)  It is possible for small-company stocks to more than double in value in any one given year.
E)  Inflation was positive each year throughout the period of 1926-2010.F) D) and E)
G) A) and B)

Question 19

What was the average rate of inflation over the period of 1926-2010?

Accepted Answer

A)  less than 2.0 percent
B)  between 2.0 and 2.5 percent
C)  between 2.5 and 3.0 percent
D)  between 3.0 and 3.5 percent
E)  greater than 3.5 percentF) B) and D)
G) B) and E)

Question 20

A stock had returns of 12 percent,16 percent,10 percent,19 percent,15 percent,and -6 percent over the last six years.What is the geometric average return on the stock for this period?

Accepted Answer

A)  10.90 percent
B)  10.68 percent
C)  13.56 percent
D)  14.76 percent
E)  15.01 percentF) A) and B)
G) B) and E)

Exam 12: Some Lessons From Capital Market History

A stock has a geometric average return of 14.6 percent and an arithmetic average return of 15.5 percent based on the last 33 years.What is the estimated average rate of return for the next 6 years based on Blume's formula?

Correct Answer
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A stock had returns of 11 percent,-18 percent,-21 percent,20 percent,and 34 percent over the past five years.What is the standard deviation of these returns?

Correct Answer
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Correct Answer
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What was the average rate of inflation over the period of 1926-2010?

Correct Answer
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The historical record for the period 1926-2010 supports which one of the following statements?

Correct Answer
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Six months ago,you purchased 100 shares of stock in Global Trading at a price of $38.70 a share.The stock pays a quarterly dividend of $0.15 a share.Today,you sold all of your shares for $40.10 per share.What is the total amount of your dividend income on this investment?

Correct Answer
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Which of the following correspond to a wide frequency distribution? I.relatively low risk II.relatively low rate of return III.relatively high standard deviation IV.relatively large risk premium

Correct Answer
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Correct Answer
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Calculate the standard deviation of the following rates of return:

Correct Answer
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Which one of the following is a correct ranking of securities based on their volatility over the period of 1926-2010? Rank from highest to lowest.

Correct Answer
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Which one of the following statements best defines the efficient market hypothesis?

Correct Answer
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Which one of the following categories of securities had the highest average return for the period 1926-2010?

Correct Answer
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One year ago,you purchased 150 shares of a stock at a price of $54.18 a share.Today,you sold those shares for $40.25 a share.During the past year,you received total dividends of $182 while inflation averaged 4.2 percent.What is your approximate real rate of return on this investment?

Correct Answer
verified

A stock has an expected rate of return of 13 percent and a standard deviation of 21 percent.Which one of the following best describes the probability that this stock will lose at least half of its value in any one given year?

Correct Answer
verified

One year ago,you purchased a stock at a price of $47.50 a share.Today,you sold the stock and realized a total loss of 22.11 percent.Your capital gain was -$12.70 a share.What was your dividend yield?

Correct Answer
verified

The average compound return earned per year over a multi-year period is called the _____ average return.

Correct Answer
verified

If you excel in analyzing the future outlook of firms,you would prefer the financial markets be ____ form efficient so that you can have an advantage in the marketplace.

Correct Answer
verified

Which one of the following correctly describes the dividend yield?

Correct Answer
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A stock had returns of 12 percent,16 percent,10 percent,19 percent,15 percent,and -6 percent over the last six years.What is the geometric average return on the stock for this period?

Correct Answer
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What is the probability that small-company stocks will produce an annual return that is more than one standard deviation below the average?

Correct Answer
verified

Exam 12: Some Lessons From Capital Market History

A stock has a geometric average return of 14.6 percent and an arithmetic average return of 15.5 percent based on the last 33 years.What is the estimated average rate of return for the next 6 years based on Blume's formula?

Correct AnswerverifiedShow Answer

A stock had returns of 11 percent,-18 percent,-21 percent,20 percent,and 34 percent over the past five years.What is the standard deviation of these returns?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What was the average rate of inflation over the period of 1926-2010?

Correct AnswerverifiedShow Answer

The historical record for the period 1926-2010 supports which one of the following statements?

Correct AnswerverifiedShow Answer

Six months ago,you purchased 100 shares of stock in Global Trading at a price of $38.70 a share.The stock pays a quarterly dividend of $0.15 a share.Today,you sold all of your shares for $40.10 per share.What is the total amount of your dividend income on this investment?

Correct AnswerverifiedShow Answer

Which of the following correspond to a wide frequency distribution? I.relatively low risk II.relatively low rate of return III.relatively high standard deviation IV.relatively large risk premium

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Calculate the standard deviation of the following rates of return:

Correct AnswerverifiedShow Answer

Which one of the following is a correct ranking of securities based on their volatility over the period of 1926-2010? Rank from highest to lowest.

Correct AnswerverifiedShow Answer

Which one of the following statements best defines the efficient market hypothesis?

Correct AnswerverifiedShow Answer

Which one of the following categories of securities had the highest average return for the period 1926-2010?

Correct AnswerverifiedShow Answer

One year ago,you purchased 150 shares of a stock at a price of $54.18 a share.Today,you sold those shares for $40.25 a share.During the past year,you received total dividends of $182 while inflation averaged 4.2 percent.What is your approximate real rate of return on this investment?

Correct AnswerverifiedShow Answer

A stock has an expected rate of return of 13 percent and a standard deviation of 21 percent.Which one of the following best describes the probability that this stock will lose at least half of its value in any one given year?

Correct AnswerverifiedShow Answer

One year ago,you purchased a stock at a price of $47.50 a share.Today,you sold the stock and realized a total loss of 22.11 percent.Your capital gain was -$12.70 a share.What was your dividend yield?

Correct AnswerverifiedShow Answer

The average compound return earned per year over a multi-year period is called the _____ average return.

Correct AnswerverifiedShow Answer

If you excel in analyzing the future outlook of firms,you would prefer the financial markets be ____ form efficient so that you can have an advantage in the marketplace.

Correct AnswerverifiedShow Answer

Which one of the following correctly describes the dividend yield?

Correct AnswerverifiedShow Answer

A stock had returns of 12 percent,16 percent,10 percent,19 percent,15 percent,and -6 percent over the last six years.What is the geometric average return on the stock for this period?

Correct AnswerverifiedShow Answer

What is the probability that small-company stocks will produce an annual return that is more than one standard deviation below the average?

Correct AnswerverifiedShow Answer

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