Question 1

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) A) and B)
G) A) and E) A

Question 2

The stock of Pepito Organic Foods is priced at $45 per share and has a dividend yield of 2.2 percent.The firm pays constant annual dividends.What is the amount of the next dividend per share?

Accepted Answer

A)  $1.10
B)  $1.72
C)  $0.99
D)  $0.91
E)  $1.15F) A) and D)
G) B) and E)

Question 3

A bond has an average return of 11.2 percent and a standard deviation of 14.6 percent.What range of returns would you expect to see 68 percent of the time on this security?

Accepted Answer

A)  -18 percent to 43.9 percent
B)  -18 percent to 40.1 percent
C)  -3.4 percent to 27.8 percent
D)  -3.4 percent to 25.8 percent
E)  -2.5 percent to 13.9 percentF) C) and D)
G) D) and E)

Question 4

A stock produced returns of 11 percent, 19 percent, and 2 percent over three of the past four years, respectively.The arithmetic average for the past four years is 9 percent.What is the standard deviation of the stock's returns for the four-year period?

Accepted Answer

A)  5.46 percent
B)  8.54 percent
C)  9.09 percent
D)  6.83 percent
E)  7.70 percentF) None of the above
G) A) and D)

Question 5

A stock has produced returns of 11.9 percent, 5.6 percent, 16.4 percent, and -4.2 percent over the past four years, respectively.What is the geometric average return?

Accepted Answer

A)  7.14 percent
B)  7.47 percent
C)  6.83 percent
D)  6.91 percent
E)  7.02 percentF) A) and E)
G) B) and E)

Question 6

One year ago, Jeni purchased 250 shares of TMO stock for $12,658.Today, she sold those shares for $52 per share.What is the capital gains yield on this investment if the dividend yield is 1.1 percent?

Accepted Answer

A)  -3.00 percent
B)  -2.75 percent
C)  3.10 percent
D)  2.70 percent
E)  1.95 percentF) A) and B)
G) A) and C)

Question 7

Over the last four years, a stock has had an arithmetic average return of 12.8 percent.Three of those four years produced returns of 22.6 percent, 15.2 percent, and -24.1 percent, respectively.What is the geometric average return for this four-year period?

Accepted Answer

A)  10.18 percent
B)  8.39 percent
C)  11.67 percent
D)  12.40 percent
E)  12.67 percentF) B) and D)
G) A) and B)

Question 8

Home Grown Tomatoes stock returned 11.6 percent, 3.2 percent, 8.1 percent, 14.2, and 9.8 percent over the past five years, respectively.What is the arithmetic average return for this period?

Accepted Answer

A)  9.38 percent
B)  10.62 percent
C)  8.10 percent
D)  11.93 percent
E)  10.10 percentF) A) and C)
G) All of the above

Question 9

The standard deviation measures the _____ of a security's returns over time.

Accepted Answer

A)  average value
B)  frequency
C)  volatility
D)  mean
E)  arithmetic averageF) C) and E)
G) C) and D)

Question 10

A stock has yielded returns of 9 percent, 16 percent, 18 percent, and -6 percent over the past four years, respectively.What is the standard deviation of these returns?

Accepted Answer

A)  15.52 percent
B)  15.86 percent
C)  11.05 percent
D)  9.38 percent
E)  10.87 percentF) A) and E)
G) B) and D) E

Question 11

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

Question 12

Kelly decided to accept the risk and purchased a high growth stock.Her returns for the past five years are 32 percent, 24 percent, -48 percent, 12 percent, and -9 percent, respectively.What is the standard deviation of these returns?

Accepted Answer

A)  23.20 percent
B)  35.46 percent
C)  17.88 percent
D)  32.03 percent
E)  28.39 percentF) B) and D)
G) A) and B)

Question 13

Bandor Furniture pays a constant annual dividend.Last year, the dividend yield was 4.9 percent when the stock was selling for $43.50 per share.What is the current price of the stock if the current dividend yield is 4 percent?

Accepted Answer

A)  $35.51
B)  $53.29
C)  $38.62
D)  $41.54
E)  $42.07F) A) and B)
G) B) and D)

Question 14

The stock of Arbitrage Training is priced at $37 per share and has a dividend yield of 2.8 percent.The firm pays constant annual dividends.What is the amount of the next dividend per share?

Accepted Answer

A)  $1.15
B)  $1.77
C)  $1.04
D)  $0.96
E)  $1.20F) A) and E)
G) B) and E) C

Question 15

A stock has had returns of 14 percent, -18 percent, 2 percent, 33 percent, 27 percent, and 6 percent over the last six years, respectively.What is the geometric return for this stock?

Accepted Answer

A)  10.82 percent
B)  9.32 percent
C)  10.31 percent
D)  9.47 percent
E)  8.88 percentF) A) and B)
G) C) and E)

Question 16

Over the past five years, a stock returned 8.4 percent, 8.7 percent, 3.2 percent, 1.5 percent, and 11.5 percent, respectively.What is the variance of these returns?

Accepted Answer

A)  ..041302
B)  ..043375
C)  ..006824
D)  ..165321
E)  ..005459F) B) and D)
G) B) and C)

Question 17

A security produced returns of 11 percent, 7 percent, 9 percent, 13 percent, and -14 percent over the past five years, respectively.Based on these five years, what is the probability that this stock will earn more than 16.16 percent in any one given year?

Accepted Answer

A)  .5 percent
B)  1.0 percent
C)  2.5 percent
D)  5.0 percent
E)  16.0 percentF) All of the above
G) A) and E)

Question 18

Skyler Parts pays a constant annual dividend.Last year, the dividend yield was 3.75 percent when the stock was selling for $19.75 per share.What is the current price of the stock if the current dividend yield is 5 percent?

Accepted Answer

A)  $17.81
B)  $14.81
C)  $17.92
D)  $20.84
E)  $21.37F) C) and E)
G) A) and D)

Question 19

Assume large-company stocks returned 12.1 percent on average over the past 88 years.The risk premium on these stocks was 8.6 percent and the inflation rate was 3.0 percent.What was the average nominal risk-free rate of return for those 88 years?

Accepted Answer

A)  3.5 percent
B)  9.1 percent
C)  4.6 percent
D)  .5 percent
E)  6.5 percentF) None of the above
G) A) and D)

Question 20

Which one of the following categories has the widest frequency distribution of returns for the period 1926-2014?

Accepted Answer

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

Exam 10: Some Lessons From Capital Market History

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

Correct AnswerverifiedA

The stock of Pepito Organic Foods is priced at $45 per share and has a dividend yield of 2.2 percent.The firm pays constant annual dividends.What is the amount of the next dividend per share?

Correct AnswerverifiedShow Answer

A bond has an average return of 11.2 percent and a standard deviation of 14.6 percent.What range of returns would you expect to see 68 percent of the time on this security?

Correct AnswerverifiedShow Answer

A stock produced returns of 11 percent, 19 percent, and 2 percent over three of the past four years, respectively.The arithmetic average for the past four years is 9 percent.What is the standard deviation of the stock's returns for the four-year period?

Correct AnswerverifiedShow Answer

A stock has produced returns of 11.9 percent, 5.6 percent, 16.4 percent, and -4.2 percent over the past four years, respectively.What is the geometric average return?

Correct AnswerverifiedShow Answer

One year ago, Jeni purchased 250 shares of TMO stock for $12,658.Today, she sold those shares for $52 per share.What is the capital gains yield on this investment if the dividend yield is 1.1 percent?

Correct AnswerverifiedShow Answer

Over the last four years, a stock has had an arithmetic average return of 12.8 percent.Three of those four years produced returns of 22.6 percent, 15.2 percent, and -24.1 percent, respectively.What is the geometric average return for this four-year period?

Correct AnswerverifiedShow Answer

Home Grown Tomatoes stock returned 11.6 percent, 3.2 percent, 8.1 percent, 14.2, and 9.8 percent over the past five years, respectively.What is the arithmetic average return for this period?

Correct AnswerverifiedShow Answer

The standard deviation measures the _____ of a security's returns over time.

Correct AnswerverifiedShow Answer

A stock has yielded returns of 9 percent, 16 percent, 18 percent, and -6 percent over the past four years, respectively.What is the standard deviation of these returns?

Correct AnswerverifiedE

If the financial markets are efficient then:

Correct AnswerverifiedShow Answer

Kelly decided to accept the risk and purchased a high growth stock.Her returns for the past five years are 32 percent, 24 percent, -48 percent, 12 percent, and -9 percent, respectively.What is the standard deviation of these returns?

Correct AnswerverifiedShow Answer

Bandor Furniture pays a constant annual dividend.Last year, the dividend yield was 4.9 percent when the stock was selling for $43.50 per share.What is the current price of the stock if the current dividend yield is 4 percent?

Correct AnswerverifiedShow Answer

The stock of Arbitrage Training is priced at $37 per share and has a dividend yield of 2.8 percent.The firm pays constant annual dividends.What is the amount of the next dividend per share?

Correct AnswerverifiedC

A stock has had returns of 14 percent, -18 percent, 2 percent, 33 percent, 27 percent, and 6 percent over the last six years, respectively.What is the geometric return for this stock?

Correct AnswerverifiedShow Answer

Over the past five years, a stock returned 8.4 percent, 8.7 percent, 3.2 percent, 1.5 percent, and 11.5 percent, respectively.What is the variance of these returns?

Correct AnswerverifiedShow Answer

A security produced returns of 11 percent, 7 percent, 9 percent, 13 percent, and -14 percent over the past five years, respectively.Based on these five years, what is the probability that this stock will earn more than 16.16 percent in any one given year?

Correct AnswerverifiedShow Answer

Skyler Parts pays a constant annual dividend.Last year, the dividend yield was 3.75 percent when the stock was selling for $19.75 per share.What is the current price of the stock if the current dividend yield is 5 percent?

Correct AnswerverifiedShow Answer

Assume large-company stocks returned 12.1 percent on average over the past 88 years.The risk premium on these stocks was 8.6 percent and the inflation rate was 3.0 percent.What was the average nominal risk-free rate of return for those 88 years?

Correct AnswerverifiedShow Answer

Which one of the following categories has the widest frequency distribution of returns for the period 1926-2014?

Correct AnswerverifiedShow Answer

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