Question 1

A stock has an average return of 19.2 percent and a standard deviation of 10.7 percent.In any one given year,you have a 95 percent chance that you will not lose more than _____ percent nor earn more than ____ percent if you invest in this security.

Accepted Answer

A)  -2.2; 38.2
B)  -2.2; 40.6
C)  -13.9; 28.9
D)  -13.9; 39.6
E)  -13.9; 50.3F) B) and D)
G) B) and C)

Question 2

One year ago,Debra purchased 4,200 shares of KNF stock for $177,072.Today,she sold those shares for $48.10 a share.What is the capital gains yield on this investment if the dividend yield is 4.1 percent?

Accepted Answer

A)  10.79 percent
B)  11.23 percent
C)  13.07 percent
D)  15.04 percent
E)  14.53 percentF) C) and E)
G) B) and E)

Question 3

A security produced returns of 12 percent,-11 percent,-2 percent,15 percent,and 9 percent over the past five years,respectively.Based on these five years,what is the probability that an investor in this stock will lose more than 17.06 percent in any one given year?

Accepted Answer

A)  0.50 percent
B)  1.00 percent
C)  1.25 percent
D)  2.50 percent
E)  5.00 percentF) A) and B)
G) B) and D)

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) C) and D)
G) A) and B)

Question 5

Sarah earned a 2.9 percent real rate of return on her investments for the past year.During that time,the risk-free rate was 4.1 percent and the inflation rate was 3.6 percent.What was her nominal rate of return?

Accepted Answer

A)  5.30 percent
B)  6.06 percent
C)  6.60 percent
D)  6.67 percent
E)  6.91 percentF) A) and E)
G) A) and C)

Question 6

You find a certain stock that had returns of 14 percent,-27 percent,19 percent,and 21 percent for four of the last five years,respectively.The average return of the stock over this period was 9.5 percent.What is the standard deviation of the stock's returns?

Accepted Answer

A)  11.67 percent
B)  12.90 percent
C)  14.14 percent
D)  18.47 percent
E)  20.59 percentF) A) and B)
G) B) and E)

Question 7

Which one of the following is the positive square root of the variance?

Accepted Answer

A)  Standard deviation
B)  Mean
C)  Risk-free rate
D)  Average return
E)  Real returnF) B) and D)
G) A) and D)

Question 8

Last year,Paul invested $38,000 in Oil Town stock,$11,000 in long-term government bonds,and $8,000 in U.S.Treasury bills.Over the course of the year,he earned returns of 12.1 percent,7.2 percent,and 4.1 percent,respectively.What was the nominal risk premium on Oil Town's stock for the year?

Accepted Answer

A)  2.1 percent
B)  4.9 percent
C)  6.0 percent
D)  7.8 percent
E)  8.0 percentF) B) and D)
G) All of the above

Question 9

Your portfolio has provided you with returns of 8.6 percent,14.2 percent,-3.7 percent,and 12.0 percent over the past four years,respectively.What is the geometric average return for this period?

Accepted Answer

A)  7.25 percent
B)  7.54 percent
C)  7.57 percent
D)  7.63 percent
E)  9.55 percentF) B) and D)
G) C) and D)

Question 10

Which one of the following is the hypothesis that securities markets are efficient?

Accepted Answer

A)  Geometric market hypothesis
B)  Standard deviation hypothesis
C)  Efficient markets hypothesis
D)  Capital market hypothesis
E)  Financial markets hypothesisF) A) and B)
G) A) and C)

Question 11

The stock of Southern United is priced at $40 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)  $0.840
D)  $0.871
E)  $0.875F) C) and D)
G) B) and E)

Question 12

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 4.3 percent,what was your total real rate of return on this investment?

Accepted Answer

A)  1.02 percent
B)  2.48 percent
C)  4.31 percent
D)  6.89 percent
E)  7.08 percentF) A) and B)
G) C) and D)

Question 13

Cox Footwear pays a constant annual dividend.Last year,the dividend yield was 2.5 percent when the stock was selling for $26 a share.What is the current price of the stock if the current dividend yield is 3.1 percent?

Accepted Answer

A)  $18.92
B)  $20.97
C)  $25.20
D)  $26.87
E)  $27.40F) B) and E)
G) A) and B)

Question 14

One year ago,you purchased a 5 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)  $36
B)  $60
C)  $64
D)  $74
E)  $82F) A) and B)
G) A) and E)

Question 15

Which one of the following is defined as a bell-shaped frequency distribution that is defined by its average and its standard deviation?

Accepted Answer

A)  Arithmetic average return
B)  Variance
C)  Standard deviation
D)  Probability curve
E)  Normal distributionF) B) and E)
G) None of the above

Question 16

Rocky Top pays a constant annual dividend.One year ago,when you purchased shares of that stock at $12 a share,the dividend yield was 2 percent.Over this past year,the inflation rate has been 2.6 percent.Today,the required return on this stock is 9 percent and you just sold all of your shares.What is your total nominal return on this investment? Round your answer to the nearest whole percentage.

Accepted Answer

A)  -77 percent
B)  -75 percent
C)  -76 percent
D)  70 percent
E)  76 percentF) A) and B)
G) A) and C)

Question 17

Which one of the following is the most apt to have the largest risk premium in the future based on the historical record for 1926-2011?

Accepted Answer

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

Question 18

If the financial markets are efficient then:

Accepted Answer

A)  stock prices should remain constant.
B)  stock prices should increase or decrease slowly as new events are analyzed and the information is absorbed by the markets.
C)  an increase in the value of one security should be offset by a decrease in the value of another security.
D)  stock prices will change only when an event actually occurs, not at the time the event is anticipated.
E)  stock prices should respond only to unexpected news and events.F) B) and C)
G) C) and D)

Question 19

Assume large-company stocks returned 12.8 percent on average over the past 75 years.The risk premium on these stocks was 7.9 percent and the inflation rate was 3.6 percent.What was the average nominal risk-free rate of return for those 75 years?

Accepted Answer

A)  4.90 percent
B)  9.20 percent
C)  4.26 percent
D)  8.33 percent
E)  8.60 percentF) B) and D)
G) All of the above

Question 20

Percentage returns:
I.are easy to understand.
II.relay information about a security more easily than dollar returns do.
III.are not affected by the amount of the investment.
IV.can be easily separated into dividend yield and capital gain yield.

Accepted Answer

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

Exam 10: Some Lessons From Capital Market History

Correct Answer
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Cox Footwear pays a constant annual dividend.Last year,the dividend yield was 2.5 percent when the stock was selling for $26 a share.What is the current price of the stock if the current dividend yield is 3.1 percent?

Correct Answer
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Which one of the following is the hypothesis that securities markets are efficient?

Correct Answer
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Last year,Paul invested $38,000 in Oil Town stock,$11,000 in long-term government bonds,and $8,000 in U.S.Treasury bills.Over the course of the year,he earned returns of 12.1 percent,7.2 percent,and 4.1 percent,respectively.What was the nominal risk premium on Oil Town's stock for the year?

Correct Answer
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The stock of Southern United is priced at $40 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
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Your portfolio has provided you with returns of 8.6 percent,14.2 percent,-3.7 percent,and 12.0 percent over the past four years,respectively.What is the geometric average return for this period?

Correct Answer
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A stock has an average return of 19.2 percent and a standard deviation of 10.7 percent.In any one given year,you have a 95 percent chance that you will not lose more than _ percent nor earn more than percent if you invest in this security.

Correct Answer
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One year ago,you purchased a 5 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
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Assume large-company stocks returned 12.8 percent on average over the past 75 years.The risk premium on these stocks was 7.9 percent and the inflation rate was 3.6 percent.What was the average nominal risk-free rate of return for those 75 years?

Correct Answer
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Which one of the following is the positive square root of the variance?

Correct Answer
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Sarah earned a 2.9 percent real rate of return on her investments for the past year.During that time,the risk-free rate was 4.1 percent and the inflation rate was 3.6 percent.What was her nominal rate of return?

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 4.3 percent,what was your total real rate of return on this investment?

Correct Answer
verified

Percentage returns: I.are easy to understand. II.relay information about a security more easily than dollar returns do. III.are not affected by the amount of the investment. IV.can be easily separated into dividend yield and capital gain yield.

Correct Answer
verified

If the financial markets are efficient then:

Correct Answer
verified

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
verified

One year ago,Debra purchased 4,200 shares of KNF stock for $177,072.Today,she sold those shares for $48.10 a share.What is the capital gains yield on this investment if the dividend yield is 4.1 percent?

Correct Answer
verified

You find a certain stock that had returns of 14 percent,-27 percent,19 percent,and 21 percent for four of the last five years,respectively.The average return of the stock over this period was 9.5 percent.What is the standard deviation of the stock's returns?

Correct Answer
verified

Which one of the following is the most apt to have the largest risk premium in the future based on the historical record for 1926-2011?

Correct Answer
verified

Which one of the following is defined as a bell-shaped frequency distribution that is defined by its average and its standard deviation?

Correct Answer
verified

A security produced returns of 12 percent,-11 percent,-2 percent,15 percent,and 9 percent over the past five years,respectively.Based on these five years,what is the probability that an investor in this stock will lose more than 17.06 percent in any one given year?

Correct Answer
verified

Exam 10: Some Lessons From Capital Market History

Correct AnswerverifiedShow Answer

Cox Footwear pays a constant annual dividend.Last year,the dividend yield was 2.5 percent when the stock was selling for $26 a share.What is the current price of the stock if the current dividend yield is 3.1 percent?

Correct AnswerverifiedShow Answer

Which one of the following is the hypothesis that securities markets are efficient?

Correct AnswerverifiedShow Answer

Last year,Paul invested $38,000 in Oil Town stock,$11,000 in long-term government bonds,and $8,000 in U.S.Treasury bills.Over the course of the year,he earned returns of 12.1 percent,7.2 percent,and 4.1 percent,respectively.What was the nominal risk premium on Oil Town's stock for the year?

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The stock of Southern United is priced at $40 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?

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Your portfolio has provided you with returns of 8.6 percent,14.2 percent,-3.7 percent,and 12.0 percent over the past four years,respectively.What is the geometric average return for this period?

Correct AnswerverifiedShow Answer

A stock has an average return of 19.2 percent and a standard deviation of 10.7 percent.In any one given year,you have a 95 percent chance that you will not lose more than _____ percent nor earn more than ____ percent if you invest in this security.

Correct AnswerverifiedShow Answer

One year ago,you purchased a 5 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?

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Assume large-company stocks returned 12.8 percent on average over the past 75 years.The risk premium on these stocks was 7.9 percent and the inflation rate was 3.6 percent.What was the average nominal risk-free rate of return for those 75 years?

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Which one of the following is the positive square root of the variance?

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Sarah earned a 2.9 percent real rate of return on her investments for the past year.During that time,the risk-free rate was 4.1 percent and the inflation rate was 3.6 percent.What was her nominal rate of return?

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 4.3 percent,what was your total real rate of return on this investment?

Correct AnswerverifiedShow Answer

Percentage returns: I.are easy to understand. II.relay information about a security more easily than dollar returns do. III.are not affected by the amount of the investment. IV.can be easily separated into dividend yield and capital gain yield.

Correct AnswerverifiedShow Answer

If the financial markets are efficient then:

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

One year ago,Debra purchased 4,200 shares of KNF stock for $177,072.Today,she sold those shares for $48.10 a share.What is the capital gains yield on this investment if the dividend yield is 4.1 percent?

Correct AnswerverifiedShow Answer

You find a certain stock that had returns of 14 percent,-27 percent,19 percent,and 21 percent for four of the last five years,respectively.The average return of the stock over this period was 9.5 percent.What is the standard deviation of the stock's returns?

Correct AnswerverifiedShow Answer

Which one of the following is the most apt to have the largest risk premium in the future based on the historical record for 1926-2011?

Correct AnswerverifiedShow Answer

Which one of the following is defined as a bell-shaped frequency distribution that is defined by its average and its standard deviation?

Correct AnswerverifiedShow Answer

A security produced returns of 12 percent,-11 percent,-2 percent,15 percent,and 9 percent over the past five years,respectively.Based on these five years,what is the probability that an investor in this stock will lose more than 17.06 percent in any one given year?

Correct AnswerverifiedShow Answer

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A stock has an average return of 19.2 percent and a standard deviation of 10.7 percent.In any one given year,you have a 95 percent chance that you will not lose more than _ percent nor earn more than percent if you invest in this security.

Correct Answer
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