Question 1

Which one of the following had a zero standard deviation of returns for the period of 1926-2014?

Accepted Answer

A)  All of the listed security types had a standard deviation of returns in excess of zero percent.
B)  U.S.Treasury bills
C)  Long-term corporate bonds
D)  Large-company stocks
E)  Long-term government bondsF) B) and E)
G) A) and E)

Question 2

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 3

Which one of the following statements is correct?

Accepted Answer

A)  The risk-free rate of return has a risk premium of 1.0.
B)  The reward for bearing risk is called the standard deviation.
C)  Risks and expected return are inversely related.
D)  The higher the expected rate of return, the wider the distribution of returns.
E)  Risk premiums are inversely related to the standard deviation of returns.F) A) and E)
G) A) and D)

Question 4

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

Question 5

Suppose a stock had an initial price of $47 per share, paid a dividend of $0.63 per share during the year, and had an ending share price of $ 38.What was the capital gains yield?

Accepted Answer

A)  20.31 percent
B)  -23.68 percent
C)  17.39 percent
D)  -19.15 percent
E)  -18.53 percentF) A) and C)
G) D) and E)

Question 6

Over the period of 1926-2014:

Accepted Answer

A)  the risk premium on large-company stocks was greater than the risk premium on small- company stocks.
B)  U.S.Treasury bills had a risk premium that was just slightly over 2 percent.
C)  the risk premium on long-term government bonds was zero percent.
D)  the risk premium on stocks exceeded the risk premium on bonds.
E)  U.S.Treasury bills had a negative risk premium.F) B) and C)
G) A) and E)

Question 7

Windsor stock has produced returns of 13.8 percent, 11.7 percent, 2.3 percent, -21.4 percent, and 8.9 percent over the past five years, respectively.What is the variance of these returns?

Accepted Answer

A)  .020574
B)  .031947
C)  .035682
D)  .019515
E)  .020016F) B) and C)
G) A) and E)

Question 8

One year ago, LaTresa purchased 300 shares of Outland Co.stock for $7,092.The stock does not pay any regular dividends but it did pay a special dividend of $.43 a share last week.This morning, she sold her shares for $24.05 a share.What was the total percentage return on this investment?

Accepted Answer

A)  7.67 percent
B)  4.83 percent
C)  2.50 percent
D)  3.55 percent
E)  8.24 percentF) C) and D)
G) A) and E)

Question 9

On a particular risky investment, investors require an excess return of 7 percent in addition to the risk-free rate of 4 percent.What is this excess return called?

Accepted Answer

A)  Inflation premium
B)  Required return
C)  Real return
D)  Average return
E)  Risk premiumF) B) and C)
G) B) and D)

Question 10

Which one of the following is the most apt to have the largest risk premium in the future based on the historical record for 1926-2014?

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) None of the above
G) C) and D)

Question 11

One year ago, Brookes purchased 200 shares of Surfer Bay stock for $22,250.Today, he sold those shares for $114.00 per share.What is the total return on this investment if the dividend yield is 1.2 percent?

Accepted Answer

A)  4.47 percent
B)  3.67 percent
C)  1.93 percent
D)  0.76 percent
E)  2.98 percentF) A) and B)
G) C) and D)

Question 12

Five years ago, you purchased 800 shares of stock.The annual returns have been 6.4 percent, -28.7 percent, 2.1 percent, 14.4 percent, and 32.6 percent, respectively.What is the variance of these returns?

Accepted Answer

A)  .049888
B)  .030021
C)  .030068
D)  .050133
E)  .050284F) C) and D)
G) A) and B)

Question 13

For the period 1926-2014, 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) A) and E)
G) All of the above

Question 14

Paneer Asphalt Materials pays a constant annual dividend of $1.26 per share on its stock.Last year at this time, the market rate of return on this stock was 14.9 percent.Today, the market rate has fallen to 12.5 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)  -16.11 percent
B)  --23.16 percent
C)  9.35 percent
D)  17.66 percent
E)  19.2 percentF) A) and E)
G) A) and C)

Question 15

The period 1926-2014 illustrates that U.S.Treasury bills:

Accepted Answer

A)  outperform inflation by approximately 1 percent every year.
B)  have a zero standard deviation.
C)  can either outperform or underperform inflation on an annual basis.
D)  produce a rate of return roughly equivalent to the rate of return on long-term government bonds.
E)  routinely have negative annual returns.F) B) and E)
G) B) and D)

Question 16

A stock has produced returns of 11 percent, 4 percent, -5 percent, -8 percent, and 9 percent for the past five years, respectively.What is the standard deviation of these returns?

Accepted Answer

A)  8.49 percent
B)  7.52 percent
C)  4.20 percent
D)  8.41 percent
E)  9.23 percentF) C) and E)
G) A) and D)

Question 17

Assume you earned 12.3 percent on your investments for a time period when the risk-free rate was 4.25 percent and the inflation rate was 1.2 percent.What was your real rate of return for the period?

Accepted Answer

A)  -9.71 percent
B)  8.21 percent
C)  10.97 percent
D)  --10.35 percent
E)  10.23 percentF) A) and C)
G) D) and E)

Question 18

One year ago, Marcus purchased 400 shares of Maverick Data stock for $21.052.Today, he sold those shares for $56.00 per share.What is the total return on this investment if the dividend yield is 1.9 percent?

Accepted Answer

A)  9.10 percent
B)  8.30 percent
C)  6.56 percent
D)  5.39percent
E)  7.61 percentF) A) and B)
G) C) and E)

Question 19

Which one of the following combinations will always result in an increased dividend yield?

Accepted Answer

A)  Increase in the stock price combined with a lower dividend amount
B)  Increase in the stock price combined with a higher dividend amount
C)  Decrease in the stock price combined with a lower dividend amount
D)  Decrease in the stock price combined with a higher dividend amount
E)  Increase in the stock price combined with a constant dividend amountF) All of the above
G) A) and C)

Question 20

One year ago, you purchased a 7 percent coupon bond with a face value of $1,000 when it was selling for 102.5 percent of par.Today, you sold this bond for 104 percent of par.What is your total dollar return on this investment?

Accepted Answer

A)  $85
B)  $55
C)  $70
D)  $15
E)  $100F) B) and D)
G) A) and E)

Exam 10: Some Lessons From Capital Market History

Which one of the following combinations will always result in an increased dividend yield?

Correct Answer
verified

One year ago, Marcus purchased 400 shares of Maverick Data stock for $21.052.Today, he sold those shares for $56.00 per share.What is the total return on this investment if the dividend yield is 1.9 percent?

Correct Answer
verified

Suppose a stock had an initial price of $47 per share, paid a dividend of $0.63 per share during the year, and had an ending share price of $ 38.What was the capital gains yield?

Correct Answer
verified

Correct Answer
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Assume you earned 12.3 percent on your investments for a time period when the risk-free rate was 4.25 percent and the inflation rate was 1.2 percent.What was your real rate of return for the period?

Correct Answer
verified

Which one of the following statements is correct?

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

Correct Answer
verified

The period 1926-2014 illustrates that U.S.Treasury bills:

Correct Answer
verified

On a particular risky investment, investors require an excess return of 7 percent in addition to the risk-free rate of 4 percent.What is this excess return called?

Correct Answer
verified

One year ago, Brookes purchased 200 shares of Surfer Bay stock for $22,250.Today, he sold those shares for $114.00 per share.What is the total return on this investment if the dividend yield is 1.2 percent?

Correct Answer
verified

A stock has produced returns of 11 percent, 4 percent, -5 percent, -8 percent, and 9 percent for the past five years, respectively.What is the standard deviation of these returns?

Correct Answer
verified

One year ago, you purchased a 7 percent coupon bond with a face value of $1,000 when it was selling for 102.5 percent of par.Today, you sold this bond for 104 percent of par.What is your total dollar return on this investment?

Correct Answer
verified

Five years ago, you purchased 800 shares of stock.The annual returns have been 6.4 percent, -28.7 percent, 2.1 percent, 14.4 percent, and 32.6 percent, respectively.What is the variance of these returns?

Correct Answer
verified

Windsor stock has produced returns of 13.8 percent, 11.7 percent, 2.3 percent, -21.4 percent, and 8.9 percent over the past five years, respectively.What is the variance of these returns?

Correct Answer
verified

One year ago, LaTresa purchased 300 shares of Outland Co.stock for $7,092.The stock does not pay any regular dividends but it did pay a special dividend of $.43 a share last week.This morning, she sold her shares for $24.05 a share.What was the total percentage return on this investment?

Correct Answer
verified

Which one of the following had a zero standard deviation of returns for the period of 1926-2014?

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 1926-2014?

Correct Answer
verified

Over the period of 1926-2014:

Correct Answer
verified

For the period 1926-2014, which one of the following had the smallest risk premium?

Correct Answer
verified

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

Correct Answer
verified

Exam 10: Some Lessons From Capital Market History

Which one of the following combinations will always result in an increased dividend yield?

Correct AnswerverifiedShow Answer

One year ago, Marcus purchased 400 shares of Maverick Data stock for $21.052.Today, he sold those shares for $56.00 per share.What is the total return on this investment if the dividend yield is 1.9 percent?

Correct AnswerverifiedShow Answer

Suppose a stock had an initial price of $47 per share, paid a dividend of $0.63 per share during the year, and had an ending share price of $ 38.What was the capital gains yield?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Assume you earned 12.3 percent on your investments for a time period when the risk-free rate was 4.25 percent and the inflation rate was 1.2 percent.What was your real rate of return for the period?

Correct AnswerverifiedShow Answer

Which one of the following statements is correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The period 1926-2014 illustrates that U.S.Treasury bills:

Correct AnswerverifiedShow Answer

On a particular risky investment, investors require an excess return of 7 percent in addition to the risk-free rate of 4 percent.What is this excess return called?

Correct AnswerverifiedShow Answer

One year ago, Brookes purchased 200 shares of Surfer Bay stock for $22,250.Today, he sold those shares for $114.00 per share.What is the total return on this investment if the dividend yield is 1.2 percent?

Correct AnswerverifiedShow Answer

A stock has produced returns of 11 percent, 4 percent, -5 percent, -8 percent, and 9 percent for the past five years, respectively.What is the standard deviation of these returns?

Correct AnswerverifiedShow Answer

One year ago, you purchased a 7 percent coupon bond with a face value of $1,000 when it was selling for 102.5 percent of par.Today, you sold this bond for 104 percent of par.What is your total dollar return on this investment?

Correct AnswerverifiedShow Answer

Five years ago, you purchased 800 shares of stock.The annual returns have been 6.4 percent, -28.7 percent, 2.1 percent, 14.4 percent, and 32.6 percent, respectively.What is the variance of these returns?

Correct AnswerverifiedShow Answer

Windsor stock has produced returns of 13.8 percent, 11.7 percent, 2.3 percent, -21.4 percent, and 8.9 percent over the past five years, respectively.What is the variance of these returns?

Correct AnswerverifiedShow Answer

One year ago, LaTresa purchased 300 shares of Outland Co.stock for $7,092.The stock does not pay any regular dividends but it did pay a special dividend of $.43 a share last week.This morning, she sold her shares for $24.05 a share.What was the total percentage return on this investment?

Correct AnswerverifiedShow Answer

Which one of the following had a zero standard deviation of returns for the period of 1926-2014?

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 1926-2014?

Correct AnswerverifiedShow Answer

Over the period of 1926-2014:

Correct AnswerverifiedShow Answer

For the period 1926-2014, which one of the following had the smallest risk premium?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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