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- The total dollar return on a share of stock is defined as the: A. change in the price of the stock over a period of time. B. dividend income divided by the beginning price per share. C. capital gain or loss plus any dividend income. D. change in the stock price divided by the original stock price. E. annual dividend income received.
- The dividend yield is defined as the annual dividend expressed as a percentage of the: A. average stock price. B. initial stock price. C. ending stock price. D. total annual return. E. capital gain.
- The capital gains yield is equal to: A. (Pt - Pt + 1 + Dt + 1)/Pt + 1. B. (Pt + 1 - Pt + Dt)/Pt. C. Dt + 1/Pt. D. (Pt + 1 - Pt)/Pt. E. (Pt + 1 - Pt)/Pt + 1.
- When the total return on an investment is expressed on a per-year basis it is called the: A. capital gains yield. B. dividend yield. C. holding period return. D. effective annual return. E. initial return.
- The risk-free rate is: A. another term for the dividend yield. B. defined as the increase in the value of a share of stock over time. C. the rate of return earned on an investment in a firm that you personally own. D. defined as the total of the capital gains yield plus the dividend yield. E. the rate of return on a riskless investment.
- The rate of return earned on a U.S. Treasury bill is frequently used as a proxy for the: A. risk premium. B. deflated rate of return. C. risk-free rate. D. expected rate of return. E. market rate of return.
- The risk premium is defined as the rate of return on: A. a risky asset minus the risk-free rate. B. the overall market. C. a U.S. Treasury bill. D. a risky asset minus the inflation rate. E. a riskless investment.
- The additional return earned for accepting risk is called the: A. inflated return. B. capital gains yield. C. real return. D. riskless rate. E. risk premium.
- The standard deviation is a measure of: A. volatility. B. total return. C. capital gains. D. changes in dividend yields. E. changes in the capital gains rate.
- A frequency distribution, which is completely defined by its average (mean) and standard deviation, is referred to as a(n): A. normal distribution. B. variance distribution. C. expected rate of return. D. average geometric return. E. average arithmetic return.
- The arithmetic average return is the: 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 multiyear period. D. average squared return earned in a single year. E. return earned in an average year over a multiyear period.
- The average compound return earned per year over a multiyear period is called the: A. total return B. average capital gains yield C. variance D. arithmetic average return E. geometric average return
- The average compound return earned per year over a multiyear period when inflows and outflows are considered is called the: A. total return. B. average capital gains yield. C. dollar-weighted average return. D. arithmetic average return. E. geometric average return.
- Which one of the following statements is correct concerning the dividend yield and the total return? A. The dividend yield can be zero while the total return must be a positive value. B. The total return can be negative but the dividend yield cannot be negative. C. The total return must be greater than the dividend yield. D. The total return plus the capital gains yield is equal to the dividend yield. E. The dividend yield exceeds the total return when a stock increases in value.
- Which one of the following had the highest average return for the period 1926-2006? A. large-company stocks B. U.S. Treasury bills C. long-term government bonds D. small-company stocks E. long-term corporate bonds
- Which one of the following statements is correct based on the historical returns for the period 1926-2009?
A. For the period, Treasury bills yielded a higher rate of return than long-term government bonds. B. The inflation rate exceeded the rate of return on Treasury bills during some years. C. Small-company stocks outperformed large-company stocks every year during the period. D. Bond prices, in general, were more volatile than stock prices. E. For the period, large-company stocks outperformed small-company stocks.
- Which category(ies) of investments had an annual rate of return that exceeded 100 percent for at least one year during the period 1926-2009? A. only large-company stocks B. both large-company and small-company stocks C. only small-company stocks D. corporate bonds, large-company stocks, and small-company stocks E. No category earned an annual return in excess of 100 percent for any given year during the period.
- For the period 1926-2009, the annual return on large-company stocks: A. was negative following every three-year period of positive returns. B. was only negative for two or more consecutive years during the Great Depression. C. remained negative for at least two consecutive years anytime that it was negative. D. never exceeded a positive 30 percent nor lost more than 20 percent. E. was unpredictable based on the prior year's performance.
- Which one of the following had the highest risk premium for the period 1926-2009? A. U.S. Treasury bills B. long-term government bonds C. large-company stocks D. small-company stocks E. intermediate-term government bonds
- Based on the period 1926-2006, the risk premium for U.S. Treasury bills was: A. 0.0 percent. B. 1.2 percent. C. 2.0 percent. D. 2.4 percent. E. 2.7 percent.
- Based on the period of 1926-2009, the risk premium for small-company stocks averaged: A. 12.3 percent. B. 13.9 percent. C. 15.0 percent. D. 16.8 percent. E. 17.4 percent.
- The average risk premium on large-company stocks for the period 1926-2009 was: A. 6.7 percent. B. 7.9 percent. C. 8.5 percent. D. 12.3 percent. E. 13.6 percent.
- The average risk premium on long-term corporate bonds for the period 1926-2009 was: A. 2.4 percent. B. 2.7 percent. C. 3.3 percent. D. 3.7 percent. E. 3.9 percent.
- Which one of the following had the narrowest bell curve for the period 1926-2009? A. large-company stocks B. long-term corporate bonds C. long-term government bonds D. small-company stocks E. U. S. Treasury bills
- Which one of the following had the greatest volatility of returns for the period 1926-2009? A. large-company stocks B. U.S. Treasury bills C. long-term government bonds D. small-company stocks E. long-term corporate bonds
- Which one of the following had the smallest standard deviation of returns for the period 1926-2009? A. large-company stocks B. small-company stocks C. long-term government bonds D. intermediate-term government bonds E. long-term corporate bonds
- For the period 1926-2009, long-term government bonds had an average return that ______ the average return on long-term corporate bonds while having a standard deviation that _______ the standard deviation of the long-term corporate bonds. A. exceeded; was less than B. exceeded; equaled C. exceeded; exceeded D. was less than; exceeded E. was less than; was less than
- The mean plus or minus one standard deviation defines the _____ percent probability range of a normal distribution. A. 50 B. 68 C. 82 D. 90 E. 95
- 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: 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.
- Which one of the following statements is correct? A. The standard deviation of the returns on Treasury bills is zero. B. Large-company stocks are historically riskier than small-company stocks. C. The variance is a means of measuring the volatility of returns on an investment. D. A risky asset will always have a higher annual rate of return than a riskless asset. E. There is an indirect relationship between risk and return.
- You purchased a stock for $29.40 a share, received a dividend of $0.72 per share, and sold the stock after one year for $31.30 a share. What was your dividend yield on this investment? A. 2.30 percent B. 2.38 percent C. 2.45 percent D. 2.67 percent E. 2.80 percent
- One year ago, you purchased 300 shares of stock at a cost of $7,521. The stock paid an annual dividend of $1.10 per share. Today, you sold those shares for $28.20 each. What is the capital gains yield on this investment? A. 9.96 percent B. 10.44 percent C. 12.49 percent D. 13.33 percent E. 14.75 percent
- Today, you sold 800 shares of Sky High, Inc., for $57.60 a share. You bought the shares one year ago at a price of $61.20 a share. Over the year, you received a total of $500 in dividends. What is your capital gains yield on this investment? A. -6.03 percent B. -5.88 percent C. -4.86 percent D. 6.25 percent E. 7.34 percent
- One year ago, you purchased 400 shares of Southern Cotton at $38.40 a share. During the past year, you received a total of $480 in dividends. Today, you sold your shares for $41.10 a share. What is your total return on this investment? A. 8.79 percent B. 9.64 percent C. 10.16 percent D. 11.64 percent E. 12.76 percent
- You purchased a stock for $46.70 a share and resold it one year later. Your total return for the year was 11.2 percent and the dividend yield was 2.8 percent. At what price did you resell the stock? A. $42. B. $50. C. $51. D. $52. E. $57.
- A stock sold for $30 at the beginning of the year. The end of year stock price was $30.50. What is the amount of the annual dividend if the total return for the year was 7.7 percent? A. $1. B. $1. C. $1. D. $1. E. $2.
- 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? A. $1, B. $1, C. $2, D. $3, E. $3,
- Christine owns a stock that dropped in price from $42.40 to $37.20 over the past year. The dividend yield on that stock is 1.4 percent. What is her total return on this investment for the year? A. -11.31 percent B. -10.86 percent C. -9.91 percent D. -9.59 percent E. -8.51 percent
- You have been researching a company and have estimated that the firm's stock will sell for $44 a share one year from now. You also estimate the stock will have a dividend yield of 2.18 percent. How much are you willing to pay per share today to purchase this stock if you desire a total return of 15 percent on your investment? A. $37. B. $38. C. $38. D. $39. E. $40.
- Shane purchased a stock this morning at a cost of $11 a share. He expects to receive an annual dividend of $.27 a share next year. What will the price of the stock have to be one year from today if Shane is to earn a 15 percent rate of return on this investment? A. $12. B. $12. C. $12. D. $13. E. $14.
- Elise just sold a stock and realized a 6.2 percent return for a 4-month holding period. What was her annualized rate of return? A. 11.98 percent B. 14.78 percent C. 19.78 percent D. 21.29 percent E. 27.20 percent
- You purchased a stock five months ago for $40 a share. Today, you sold that stock for $44 a share. The stock pays no dividends. What was your annualized rate of return? A. 23.93 percent B. 24.77 percent C. 25.70 percent D. 26.03 percent E. 27.67 percent
- Eight months ago, you purchased 300 shares of a non-dividend paying stock for $27 a share. Today, you sold those shares for $31.59 a share. What was your annualized rate of return on this investment? A. 17.00 percent B. 21.45 percent C. 25.50 percent D. 26.55 percent E. 28.00 percent
- Jason owned a stock for three months and earned an annualized rate of return of 10.02 percent. What was the holding period return? A. 2.37 percent B. 2.42 percent C. 2.46 percent D. 2.67 percent E. 2.72 percent
- An asset had annual returns of 12, 18, 6, -9, and 5 percent, respectively, for the last five years. What is the variance of these returns? A.. B.. C.. D.. E..
- Over the past five years, Northern Railway stock had annual returns of 11, 15, -5, 8.5, and 18 percent, respectively. What is the variance of these returns? A.. B.. C.. D.. E..
- An asset had returns of 6.8, 5.4, 3.6,-4.2, and -1.3 percent, respectively, over the past five years. What is the variance of these returns? A.. B.. C.. D.. E..
- An asset had annual returns of 14, 11, -15, 2, and 37 percent, respectively, for the past five years. What is the standard deviation of these returns? A. 8.96 percent B. 16.05 percent C. 17.92 percent D. 18.91 percent E. 20.03 percent
- Over the past four years, a stock produced returns of 13, 6, -5, and 18 percent, respectively. What is the standard deviation of these returns? A. 8.63 percent B. 9.93 percent C. 9.97 percent D. 10.11 percent E. 10.15 percent
- Uptown Industries common stock had returns of 9.2, 11.3, 10.6, and 5.4 percent, respectively, over the past four years. What is the standard deviation of these returns? A. 2.07 percent B. 2.38 percent C. 2.41 percent D. 2.59 percent E. 2.63 percent
- An asset has an average annual historical return of 11.6 percent and a standard deviation of 17.8 percent. What range of returns would you expect to see 95 percent of the time? A. -41.8 to +65.0 percent B. -34.4 to +53.6 percent C. -24.0 to +47.2 percent D. -6.2 to +29.4 percent E. -5.4 to +41.0 percent
- A stock has an average historical return of 14.3 percent and a standard deviation of 18.2 percent. Which range of returns would you expect to see approximately two-thirds of the time? A. -23.8 to +53.0 percent B. +4.6 to +33.8 percent C. +5.8 to +31.6 percent D. -3.9 to +32.5 percent E. -5.8 to +31.6 percent
- An asset has an average historical rate of return of 13.2 percent and a variance of .00972196. What range of returns would you expect to see approximately two-thirds of the time? A. -2.28 to +24.48 percent B. -6.52 to +32.92 percent C. -9.58 to +38.8 percent D. +3.34 to +23.06 percent E. +13.1 to + 13.3 percent
- Jeremy owns a stock that has historically returned 8.5 percent annually with a standard deviation of 11. percent. There is only a 0.5 percent chance that the stock will produce a return greater than _____ percent in any one year. A. 20. B. 22. C. 32. D. 42. E. 54.
- Jefferson Mills stock produced returns of 14.8, 22.6, 5.9, and 9.7 percent, respectively, over the past four years. During those same years, U.S. Treasury bills returned 3.8, 4.6, 4.8, and 4.0 percent, respectively, for the same time period. What is the variance of the risk premiums on Jefferson Mills stock for these four years? A.. B.. C.. D.. E..
- Over the past four years, the common stock of JL Steel Co. produced annual returns of 7.2, 4.8, 10.2, and 12.6 percent, respectively. During those same years, U.S. Treasury bills returned 3.2, 3.4, 4.2, and 4.5 percent, respectively. What is the standard deviation of the risk premium on JL Steel Co. stock for this time period? A. 2.23 percent B. 2.86 percent C. 3.29 percent D. 4.46 percent E. 4.61 percent
- Big Town Markets common stock returned 13.8, 14.2, 9.7, 5.3, and 12.2 percent, respectively, over the past five years. What is the arithmetic average return? A. 10.99 percent B. 11.04 percent C. 11.56 percent D. 12.20 percent E. 13.80 percent
- A stock produced annual returns of 5, -21, 11, 42, and 4 percent over the past five years, respectively. What is the geometric average return? A. 5.78 percent B. 6.03 percent C. 6.34 percent D. 7.21 percent E. 8.20 percent
- Over the past five years, an investment produced annual returns of 17, 22, -19, 3, and 15 percent, respectively. What is the geometric average return? A. 5.42 percent B. 6.49 percent C. 8.00 percent D. 15.60 percent E. 16.00 percent
- A portfolio had an original value of $7,400 seven years ago. The current value of the portfolio is $11,898. What is the average geometric return on this portfolio? A. 7.02 percent B. 7.47 percent C. 7.59 percent D. 7.67 percent E. 7.88 percent
- An initial investment of $25,000 forty years ago is worth $1,533,913 today. What is the geometric average return on this investment? A. 9.47 percent B. 10.84 percent C. 11.23 percent D. 11.47 percent E. 12.08 percent
- A stock had year end prices of $24, $27, $32, and $26 over the past four years, respectively. What is the geometric average return? A. 2.02 percent B. 2.18 percent C. 2.55 percent D. 2.70 percent E. 2.81 percent
- The geometric return on a stock over the past 10 years was 8.42 percent. The arithmetic return over the same period was 9.02 percent. What is the best estimate of the average return on this stock over the next 5 years? A. 8.75 percent B. 9.05 percent C. 9.08 percent D. 9.13 percent E. 9.47 percent
- The geometric return on an asset over the past 12 years has been 13.47 percent. The arithmetic return over the same period was 13.86 percent. What is the best estimate of the average return on this asset over the next 5 years? A. 13.47 percent B. 13.67 percent C. 13.72 percent D. 13.81 percent E. 13.86 percent
- A stock has an average arithmetic return of 12.55 percent and an average geometric return of 12. percent based on the annual returns for the last 15 years. What is projected average annual return on this stock for the next 10 years? A. 12.17 percent B. 12.21 percent C. 12.38 percent D. 12.50 percent E. 12.69 percent
- Lisa owns a stock that has an average geometric return of 11.34 percent and an average arithmetic return of 11.51 percent over the past six years. What average annual rate of return should Lisa expect to earn over the next four years? A. 11.38 percent B. 11.41 percent C. 11.44 percent D. 11.47 percent E. 11.51 percent
- Tom decides to begin investing some portion of his annual bonus, beginning this year with $5,000. In the first year he earns a 10% return and adds $3,500 to his investment. In the second his portfolio loses 5% but, sticking to his plan, he adds $500 to his portfolio. In this year his portfolio returns 2%. What is Tom's dollar-weighted average return on his investments? A. 0.34 percent B. 1.02 percent C. 1.54 percent D. 2.23 percent E. 2.58 percent
- Bill has been adding funds to his investment account each year for the past 3 years. He started with an initial investment of $1,000. After earning a 10% return the first year, he added $3,000 to his portfolio. In this year his investments lost 5%. Undeterred, Bill added $2,000 the next year and earned a 2% return. Last year, discouraged by the recent results, he only added $500 to his portfolio, but in this final year his investments earned 8%. What was Bill's dollar-weighted average return for his investments? A. 1.5 percent B. 2.0 percent C. 2.5 percent D. 3.0 percent E. 3.5 percent
- Jim began his investing program with a $4000 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? A. 0.5 percent B. 0.8 percent C. 1.0 percent D. 1.2 percent E. 1.5 percent
ch01 Key
- The total dollar return on a share of stock is defined as the: A. change in the price of the stock over a period of time. B. dividend income divided by the beginning price per share. C. capital gain or loss plus any dividend income. D. change in the stock price divided by the original stock price. E. annual dividend income received.
See Section 1.
Blooms: Knowledge Jordan - Chapter 01 # Learning Objective: 01-01 How to calculate the return on an investment using different methods. Level of Difficulty: Core Section: 1. Topic: Total Dollar Return
- The dividend yield is defined as the annual dividend expressed as a percentage of the: A. average stock price. B. initial stock price. C. ending stock price. D. total annual return. E. capital gain.
See Section 1.
Blooms: Knowledge Jordan - Chapter 01 # Learning Objective: 01-01 How to calculate the return on an investment using different methods. Level of Difficulty: Core Section: 1. Topic: Dividend Yield
- The capital gains yield is equal to: A. (Pt - Pt + 1 + Dt + 1)/Pt + 1. B. (Pt + 1 - Pt + Dt)/Pt. C. Dt + 1/Pt. D. (Pt + 1 - Pt)/Pt. E. (Pt + 1 - Pt)/Pt + 1.
See Section 1.
Blooms: Knowledge Jordan - Chapter 01 # Learning Objective: 01-01 How to calculate the return on an investment using different methods. Level of Difficulty: Core Section: 1. Topic: Capital Gains Yield
- When the total return on an investment is expressed on a per-year basis it is called the: A. capital gains yield. B. dividend yield. C. holding period return. D. effective annual return. E. initial return.
See Section 1.
Blooms: Knowledge Jordan - Chapter 01 # Learning Objective: 01-01 How to calculate the return on an investment using different methods. Level of Difficulty: Core Section: 1. Topic: Effective Annual Return
- The risk-free rate is: A. another term for the dividend yield. B. defined as the increase in the value of a share of stock over time. C. the rate of return earned on an investment in a firm that you personally own. D. defined as the total of the capital gains yield plus the dividend yield. E. the rate of return on a riskless investment.
See Section 1.
Blooms: Knowledge Jordan - Chapter 01 # Learning Objective: 01-01 How to calculate the return on an investment using different methods. Level of Difficulty: Core Section: 1. Topic: Risk-Free Rate
- The rate of return earned on a U.S. Treasury bill is frequently used as a proxy for the: A. risk premium. B. deflated rate of return. C. risk-free rate. D. expected rate of return. E. market rate of return.
See Section 1.
Blooms: Knowledge Jordan - Chapter 01 # Learning Objective: 01-01 How to calculate the return on an investment using different methods. Level of Difficulty: Core Section: 1. Topic: Risk-Free Rate
- The risk premium is defined as the rate of return on: A. a risky asset minus the risk-free rate. B. the overall market. C. a U.S. Treasury bill. D. a risky asset minus the inflation rate. E. a riskless investment.
See Section 1.
Blooms: Knowledge Jordan - Chapter 01 # Learning Objective: 01-03 The historical risks on various important types of investments. Level of Difficulty: Core Section: 1. Topic: Risk Premium
- The average compound return earned per year over a multiyear period is called the: A. total return B. average capital gains yield C. variance D. arithmetic average return E. geometric average return
See Section 1.
Blooms: Knowledge Jordan - Chapter 01 # Learning Objective: 01-01 How to calculate the return on an investment using different methods. Level of Difficulty: Core Section: 1. Topic: Geometric Average Return
- The average compound return earned per year over a multiyear period when inflows and outflows are considered is called the: A. total return. B. average capital gains yield. C. dollar-weighted average return. D. arithmetic average return. E. geometric average return.
See Section 1.
Blooms: Knowledge Jordan - Chapter 01 # Learning Objective: 01-01 How to calculate the return on an investment using different methods. Level of Difficulty: Core Section: 1. Topic: Dollar-Weighted Average Return
- Which one of the following statements is correct concerning the dividend yield and the total return?
A. The dividend yield can be zero while the total return must be a positive value. B. The total return can be negative but the dividend yield cannot be negative. C. The total return must be greater than the dividend yield. D. The total return plus the capital gains yield is equal to the dividend yield. E. The dividend yield exceeds the total return when a stock increases in value.
See Section 1.
Blooms: Comprehension Jordan - Chapter 01 # Learning Objective: 01-01 How to calculate the return on an investment using different methods. Level of Difficulty: Core Section: 1. Topic: Dividend Yield and Total Return
- An annualized return: A. is less than a holding period return when the holding period is less than one year. B. is expressed as the summation of the capital gains yield and the dividend yield on an investment. C. is expressed as the capital gains yield that would have been realized if an investment had been held for a twelve-month period. D. is computed as (1 + holding period percentage return)m, where m is the number of holding periods in a year. E. is computed as (1 + holding period percentage return)m, where m is the number of months in the holding period.
See Section 1.
Blooms: Comprehension Jordan - Chapter 01 # Learning Objective: 01-01 How to calculate the return on an investment using different methods. Level of Difficulty: Core Section: 1. Topic: Annualized Return
- Stacey purchased 300 shares of Coulter Industries stock and held it for 4 months before reselling it. What is the value of "m" when computing the annualized return on this investment? A.. B.. C.. D. 3. E. 4.
See Section 1.
Blooms: Comprehension Jordan - Chapter 01 # Learning Objective: 01-01 How to calculate the return on an investment using different methods. Level of Difficulty: Core Section: 1. Topic: Annualized Return
- Capital gains are included in the return on an investment: A. when either the investment is sold or the investment has been owned for at least one year. B. only if the investment is sold and the capital gain is realized. C. whenever dividends are paid. D. whether or not the investment is sold. E. only if the investment incurs a loss in value or is sold.
See Section 1.
Blooms: Comprehension Jordan - Chapter 01 # Learning Objective: 01-01 How to calculate the return on an investment using different methods. Level of Difficulty: Core Section: 1. Topic: Capital Gains
