Question 1

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.

Accepted Answer

A)  higher; higher
B)  higher; lower
C)  lower; higher
D)  lower; lower
E)  The distribution of returns does not affect the expected average rate of return.F) D) and E)
G) All of the above

Question 2

An asset had annual returns of 17, −35, −18, 24, and 6 percent, respectively, over the past five years. What is the arithmetic average return?

Accepted Answer

A)  −1.2%
B)  .8%
C)  1.2%
D)  1.6%
E)  2.3%F) B) and E)
G) C) and D)

Question 3

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

Accepted Answer

A)  risk premium.
B)  deflated rate of return.
C)  risk-free rate.
D)  expected rate of return.
E)  market rate of return.F) B) and D)
G) D) and E)

Question 4

Over the past four years, Jellystone Quarry stock produced returns of 12.5, 15.1, 8.7, and 2.6 percent, respectively. For the same time period, the risk-free rate 4.7, 5.3, 3.9, and 3.4 percent each year, respectively. What is the arithmetic average risk premium on this stock during these four years?

Accepted Answer

A)  5.13%
B)  5.25%
C)  5.40%
D)  5.83%
E)  5.97%F) A) and E)
G) C) and D)

Question 5

Over the past five years, Southwest Railway stock had annual returns of 10, 14, −6, 7.5, and 16 percent, respectively. What is the variance of these returns?

Accepted Answer

A)  .00548
B)  .00685
C)  .00750
D)  .01370
E)  .02740F) A) and E)
G) A) and B)

Question 6

Which one of the following had the highest average return for the period 1926-2018?

Accepted Answer

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

Question 7

Todd purchased 600 shares of stock at a price of $68.20 a share and received a dividend of $1.42 per share. After six months, he resold the stock for $71.30 a share. What was his total dollar return?

Accepted Answer

A)  $1,008
B)  $1,860
C)  $2,712
D)  $3,211
E)  $3,400F) All of the above
G) C) and D)

Question 8

The arithmetic average return is the:

Accepted Answer

A)  summation of the returns for a number of years, t, divided by (t − 1) .
B)  compound total return for a period of years, t, divided by t.
C)  average compound return earned per year over a multi-year period.
D)  average squared return earned in a single year.
E)  return earned in an average year over a multi-year period.F) B) and D)
G) All of the above

Question 9

Assume you own a portfolio that is invested 50 percent in large-company stocks and 50 percent in corporate bonds. If you want to increase the potential annual return on this portfolio, you could:

Accepted Answer

A)  decrease the investment in stocks and increase the investment in bonds.
B)  replace the corporate bonds with intermediate-term government bonds.
C)  replace the corporate bonds with Treasury bills.
D)  increase the standard deviation of the portfolio.
E)  reduce the expected volatility of the portfolio.F) A) and B)
G) C) and E)

Question 10

Today, you sold 800 shares of DeSoto, Inc., for $55.50 a share. You bought the shares one year ago at a price of $60.02 a share. Over the year, you received a total of $500 in dividends. What is your capital gains yield on this investment?

Accepted Answer

A)  −7.53%
B)  −8.14%
C)  −4.86%
D)  8.14%
E)  7.53%F) C) and D)
G) A) and E)

Question 11

Jeremy owns a stock that has historically returned 7.5 percent annually with a standard deviation of 10.2 percent. There is only a .5 percent chance that the stock will produce a return greater than ________ percent in any one year.

Accepted Answer

A)  20.9
B)  22.9
C)  32.2
D)  38.1
E)  54.8F) C) and E)
G) A) and C)

Question 12

You own a stock that has produced an arithmetic average return of 5.6 percent over the past five years. The annual returns for the first four years were 15, 10, −18, and 8 percent, respectively. What was the rate of return on the stock in year five?

Accepted Answer

A)  −5.00%
B)  2.75%
C)  6.25%
D)  13.00%
E)  32.00%F) A) and B)
G) D) and E)

Question 13

Eileen just sold a stock and realized a 6.25 percent return for a 7-month holding period. What was her annualized rate of return?

Accepted Answer

A)  9.98%
B)  10.95%
C)  12.78%
D)  15.29%
E)  17.20%F) D) and E)
G) B) and C)

Question 14

One year ago, you purchased 400 shares of Southern Cotton at $36.20 a share. During the past year, you received a total of $250 in dividends. Today, you sold your shares for $38.50 a share. What is your total return on this investment?

Accepted Answer

A)  7.60%
B)  8.08%
C)  9.69%
D)  11.64%
E)  12.68%F) B) and D)
G) B) and E)

Question 15

Which one of the following had the smallest standard deviation of returns for the period 1926-2018?

Accepted Answer

A)  large-company stocks
B)  small-company stocks
C)  long-term government bonds
D)  intermediate-term government bonds
E)  long-term corporate bondsF) A) and B)
G) A) and C)

Question 16

You purchased a stock for $35.00 a share and resold it one year later. Your total return for the year was 7.5 percent and the dividend yield was 1.4 percent. At what price did you resell the stock?

Accepted Answer

A)  $35.75
B)  $36.05
C)  $36.15
D)  $37.14
E)  $38.24F) D) and E)
G) A) and B)

Question 17

You purchased a stock for $50.00 a share and resold it one year later. Your total return for the year was 11.5 percent and the dividend yield was 2.8 percent. At what price did you resell the stock?

Accepted Answer

A)  $42.78
B)  $50.62
C)  $51.93
D)  $52.08
E)  $54.35F) A) and B)
G) A) and C)

Question 18

An asset had annual returns of 13, 10, −14, 3, and 36 percent, respectively, for the past five years. What is the standard deviation of these returns?

Accepted Answer

A)  8.96%
B)  16.05%
C)  17.92%
D)  18.09%
E)  20.03%F) A) and E)
G) None of the above

Question 19

John began his investing program with a $5,500 initial investment. The table below recaps his returns each year as well as the amounts he added to his investment account. What is his dollar-weighted average return?
  Time  Investment  Return 0$5,5008.5%1$2,000−5.0%2$2,6004.5%3$3,0009.0%4$900−2.5%\begin{array}{ccr}	ext { Time } & 	ext { Investment } & 	ext { Return } \0 & \$ 5,500 & 8.5\% \1 & \$ 2,000 & -5.0\% \2 & \$ 2,600 & 4.5\% \3 & \$ 3,000 & 9.0\% \4 & \$ 900 & -2.5\%\end{array} Time 01234​ Investment $5,500$2,000$2,600$3,000$900​ Return 8.5%−5.0%4.5%9.0%−2.5%​

Accepted Answer

A)  1.5%
B)  1.8%
C)  2.0%
D)  2.2%
E)  2.6% F) A) and E)
G) C) and D)

Question 20

Over the past four years, the common stock of Jess Electronics Co. produced annual returns of 7.2, 5.8, 11.2, and 13.6 percent, respectively. Treasury bills produced returns of 3.4, 3.3, 4.1, and 4.0 percent, respectively over the same period. What is the standard deviation of the risk premium on Jess Electronics Co. stock for this time period?

Accepted Answer

A)  2.23%
B)  2.86%
C)  3.22%
D)  4.46%
E)  4.61%F) B) and D)
G) B) and C)

Exam 1: A Brief History of Risk and Return

Today, you sold 800 shares of DeSoto, Inc., for $55.50 a share. You bought the shares one year ago at a price of $60.02 a share. Over the year, you received a total of $500 in dividends. What is your capital gains yield on this investment?

Correct Answer
verified

The arithmetic average return is the:

Correct Answer
verified

Correct Answer
verified

You purchased a stock for $50.00 a share and resold it one year later. Your total return for the year was 11.5 percent and the dividend yield was 2.8 percent. At what price did you resell the stock?

Correct Answer
verified

An asset had annual returns of 17, −35, −18, 24, and 6 percent, respectively, over the past five years. What is the arithmetic average return?

Correct Answer
verified

Over the past five years, Southwest Railway stock had annual returns of 10, 14, −6, 7.5, and 16 percent, respectively. What is the variance of these returns?

Correct Answer
verified

An asset had annual returns of 13, 10, −14, 3, and 36 percent, respectively, for the past five years. What is the standard deviation of these returns?

Correct Answer
verified

Which one of the following had the highest average return for the period 1926-2018?

Correct Answer
verified

Jeremy owns a stock that has historically returned 7.5 percent annually with a standard deviation of 10.2 percent. There is only a .5 percent chance that the stock will produce a return greater than ________ percent in any one year.

Correct Answer
verified

You purchased a stock for $35.00 a share and resold it one year later. Your total return for the year was 7.5 percent and the dividend yield was 1.4 percent. At what price did you resell the stock?

Correct Answer
verified

You own a stock that has produced an arithmetic average return of 5.6 percent over the past five years. The annual returns for the first four years were 15, 10, −18, and 8 percent, respectively. What was the rate of return on the stock in year five?

Correct Answer
verified

Eileen just sold a stock and realized a 6.25 percent return for a 7-month holding period. What was her annualized rate of return?

Correct Answer
verified

Todd purchased 600 shares of stock at a price of $68.20 a share and received a dividend of $1.42 per share. After six months, he resold the stock for $71.30 a share. What was his total dollar return?

Correct Answer
verified

Correct Answer
verified

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.

Correct Answer
verified

One year ago, you purchased 400 shares of Southern Cotton at $36.20 a share. During the past year, you received a total of $250 in dividends. Today, you sold your shares for $38.50 a share. What is your total return on this investment?

Correct Answer
verified

Which one of the following had the smallest standard deviation of returns for the period 1926-2018?

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Assume you own a portfolio that is invested 50 percent in large-company stocks and 50 percent in corporate bonds. If you want to increase the potential annual return on this portfolio, you could:

Correct Answer
verified

Exam 1: A Brief History of Risk and Return

Today, you sold 800 shares of DeSoto, Inc., for $55.50 a share. You bought the shares one year ago at a price of $60.02 a share. Over the year, you received a total of $500 in dividends. What is your capital gains yield on this investment?

Correct AnswerverifiedShow Answer

The arithmetic average return is the:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

You purchased a stock for $50.00 a share and resold it one year later. Your total return for the year was 11.5 percent and the dividend yield was 2.8 percent. At what price did you resell the stock?

Correct AnswerverifiedShow Answer

An asset had annual returns of 17, −35, −18, 24, and 6 percent, respectively, over the past five years. What is the arithmetic average return?

Correct AnswerverifiedShow Answer

Over the past five years, Southwest Railway stock had annual returns of 10, 14, −6, 7.5, and 16 percent, respectively. What is the variance of these returns?

Correct AnswerverifiedShow Answer

An asset had annual returns of 13, 10, −14, 3, and 36 percent, respectively, for the past five years. What is the standard deviation of these returns?

Correct AnswerverifiedShow Answer

Which one of the following had the highest average return for the period 1926-2018?

Correct AnswerverifiedShow Answer

Jeremy owns a stock that has historically returned 7.5 percent annually with a standard deviation of 10.2 percent. There is only a .5 percent chance that the stock will produce a return greater than ________ percent in any one year.

Correct AnswerverifiedShow Answer

You purchased a stock for $35.00 a share and resold it one year later. Your total return for the year was 7.5 percent and the dividend yield was 1.4 percent. At what price did you resell the stock?

Correct AnswerverifiedShow Answer

You own a stock that has produced an arithmetic average return of 5.6 percent over the past five years. The annual returns for the first four years were 15, 10, −18, and 8 percent, respectively. What was the rate of return on the stock in year five?

Correct AnswerverifiedShow Answer

Eileen just sold a stock and realized a 6.25 percent return for a 7-month holding period. What was her annualized rate of return?

Correct AnswerverifiedShow Answer

Todd purchased 600 shares of stock at a price of $68.20 a share and received a dividend of $1.42 per share. After six months, he resold the stock for $71.30 a share. What was his total dollar return?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

One year ago, you purchased 400 shares of Southern Cotton at $36.20 a share. During the past year, you received a total of $250 in dividends. Today, you sold your shares for $38.50 a share. What is your total return on this investment?

Correct AnswerverifiedShow Answer

Which one of the following had the smallest standard deviation of returns for the period 1926-2018?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Assume you own a portfolio that is invested 50 percent in large-company stocks and 50 percent in corporate bonds. If you want to increase the potential annual return on this portfolio, you could:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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