Question 1

Over the past fifteen years, the common stock of The Flower Shoppe, Inc.has produced an arithmetic average return of 12.2 percent and a geometric average return of 11.5 percent.What is the projected return on this stock for the next five years according to Blume's formula?

Accepted Answer

A)  11.70 percent
B)  11.89 percent
C)  12.00 percent
D)  12.03 percent
E)  12.12 percentF) A) and E)
G) C) and E)

Question 2

Suppose you bought a 10 percent coupon bond one year ago for $950.The face value of the bond is $1,000.The bond sells for $985 today.If the inflation rate last year was 9 percent, what was your total real rate of return on this investment?

Accepted Answer

A)  -4.88 percent
B)  -5.32 percent
C)  4.78 percent
D)  9.78 percent
E)  10.47 percentF) A) and E)
G) B) and E)

Question 3

Which one of the following statements best defines the efficient market hypothesis?

Accepted Answer

A)  Efficient markets limit competition.
B)  Security prices in efficient markets remain steady as new information becomes available.
C)  Mispriced securities are common in efficient markets.
D)  All securities in an efficient market are zero net present value investments.
E)  Profits are removed as a market incentive when markets become efficient.F) C) and D)
G) A) and B)

Question 4

A year ago, you purchased 300 shares of Stellar Wood Products, Inc.stock at a price of $8.62 per share.The stock pays an annual dividend of $0.10 per share.Today, you sold all of your shares for $4.80 per share.What is your total dollar return on this investment?

Accepted Answer

A)  -$382
B)  -$1,372
C)  -$1,528
D)  -$1,116
E)  -$1,360F) A) and B)
G) A) and C)

Question 5

Four months ago, you purchased 1,500 shares of Lakeside Bank stock for $11.20 a share.You have received dividend payments equal to $0.25 a share.Today, you sold all of your shares for $8.60 a share.What is your total dollar return on this investment?

Accepted Answer

A)  -$3,900
B)  -$3,525
C)  -$3,150
D)  -$2,950
E)  -$2,875F) D) and E)
G) A) and D)

Question 6

Last year, you purchased a stock at a price of $47.10 a share.Over the course of the year, you received $2.40 per share in dividends while inflation averaged 3.4 percent.Today, you sold your shares for $49.50 a share.What is your approximate real rate of return on this investment?

Accepted Answer

A)  6.30 percent
B)  6.79 percent
C)  7.18 percent
D)  9.69 percent
E)  10.19 percentF) A) and C)
G) A) and E)

Question 7

According to Jeremy Siegel, the real return on stocks over the long-term has averaged about:

Accepted Answer

A)  6.7 percent
B)  8.7 percent
C)  10.4 percent
D)  12.3 percent
E)  14.8 percentF) B) and D)
G) D) and E)

Question 8

One year ago, you purchased a stock at a price of $47.50 a share.Today, you sold the stock and realized a total loss of 22.11 percent.Your capital gain was -$12.70 a share.What was your dividend yield?

Accepted Answer

A)  4.63 percent
B)  4.88 percent
C)  5.02 percent
D)  12.67 percent
E)  14.38 percentF) A) and B)
G) B) and E)

Question 9

You just sold 600 shares of Wesley, Inc.stock at a price of $32.04 a share.Last year, you paid $30.92 a share to buy this stock.Over the course of the year, you received dividends totaling $1.20 per share.What is your total capital gain on this investment?

Accepted Answer

A)  -$618
B)  -$672
C)  $672
D)  $618
E)  $720F) A) and D)
G) B) and C)

Question 10

A stock had returns of 11 percent, -18 percent, -21 percent, 20 percent, and 34 percent over the past five years.What is the standard deviation of these returns?

Accepted Answer

A)  18.74 percent
B)  20.21 percent
C)  20.68 percent
D)  24.01 percent
E)  23.49 percentF) C) and E)
G) A) and D)

Question 11

A stock had annual returns of 3.6 percent, -8.7 percent, 5.6 percent, and 12.5 percent over the past four years.Which one of the following best describes the probability that this stock will produce a return of 22 percent or more in a single year?

Accepted Answer

A)  less than 0.1 percent
B)  less than 0.5 percent but greater than 0.1 percent
C)  less than 1.0 percent but greater the 0.5 percent
D)  less than 2.5 percent but greater than 0.5 percent
E)  less than 5 percent but greater than 2.5 percentF) None of the above
G) B) and E)

Question 12

Which one of the following statements is a correct reflection of the U.S.markets for the period 1926-2010?

Accepted Answer

A)  U.S.Treasury bill returns never exceeded a 9 percent return in any one year during the period.
B)  U.S.Treasury bills provided a positive rate of return each and every year during the period.
C)  Inflation equaled or exceeded the return on U.S.Treasury bills every year during the period.
D)  Long-term government bonds outperformed U.S.Treasury bills every year during the period.
E)  National deflation occurred at least once every decade during the period.F) A) and E)
G) A) and B)

Question 13

Which one of the following best defines the variance of an investment's annual returns over a number of years?

Accepted Answer

A)  The average squared difference between the arithmetic and the geometric average annual returns.
B)  The squared summation of the differences between the actual returns and the average geometric return.
C)  The average difference between the annual returns and the average return for the period.
D)  The difference between the arithmetic average and the geometric average return for the period.
E)  The average squared difference between the actual returns and the arithmetic average return.F) None of the above
G) B) and C)

Question 14

West Wind Tours stock is currently selling for $48 a share.The stock has a dividend yield of 3.2 percent.How much dividend income will you receive per year if you purchase 200 shares of this stock?

Accepted Answer

A)  $24.96
B)  $36.20
C)  $424.80
D)  $362.00
E)  $307.20F) B) and E)
G) C) and D)

Question 15

Which one of the following categories of securities had the highest average return for the period 1926-2010?

Accepted Answer

A)  U.S.Treasury bills
B)  large company stocks
C)  small company stocks
D)  long-term corporate bonds
E)  long-term government bondsF) A) and B)
G) A) and C)

Question 16

The primary purpose of Blume's formula is to:

Accepted Answer

A)  compute an accurate historical rate of return.
B)  determine a stock's true current value.
C)  consider compounding when estimating a rate of return.
D)  determine the actual real rate of return.
E)  project future rates of return.F) A) and B)
G) A) and E)

Question 17

Which of the following statements is correct in relation to a stock investment?
I.The capital gains yield can be positive, negative, or zero.
II.The dividend yield can be positive, negative, or zero.
III.The total return can be positive, negative, or zero.
IV.Neither the dividend yield nor the total return can be negative.

Accepted Answer

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

Exam 12: Return, Risk and the Security Market

A year ago, you purchased 300 shares of Stellar Wood Products, Inc.stock at a price of $8.62 per share.The stock pays an annual dividend of $0.10 per share.Today, you sold all of your shares for $4.80 per share.What is your total dollar return on this investment?

Correct Answer
verified

Which one of the following statements best defines the efficient market hypothesis?

Correct Answer
verified

Four months ago, you purchased 1,500 shares of Lakeside Bank stock for $11.20 a share.You have received dividend payments equal to $0.25 a share.Today, you sold all of your shares for $8.60 a share.What is your total dollar return on this investment?

Correct Answer
verified

The primary purpose of Blume's formula is to:

Correct Answer
verified

Which one of the following categories of securities had the highest average return for the period 1926-2010?

Correct Answer
verified

A stock had returns of 11 percent, -18 percent, -21 percent, 20 percent, and 34 percent over the past five years.What is the standard deviation of these returns?

Correct Answer
verified

Suppose you bought a 10 percent coupon bond one year ago for $950.The face value of the bond is $1,000.The bond sells for $985 today.If the inflation rate last year was 9 percent, what was your total real rate of return on this investment?

Correct Answer
verified

According to Jeremy Siegel, the real return on stocks over the long-term has averaged about:

Correct Answer
verified

West Wind Tours stock is currently selling for $48 a share.The stock has a dividend yield of 3.2 percent.How much dividend income will you receive per year if you purchase 200 shares of this stock?

Correct Answer
verified

One year ago, you purchased a stock at a price of $47.50 a share.Today, you sold the stock and realized a total loss of 22.11 percent.Your capital gain was -$12.70 a share.What was your dividend yield?

Correct Answer
verified

Over the past fifteen years, the common stock of The Flower Shoppe, Inc.has produced an arithmetic average return of 12.2 percent and a geometric average return of 11.5 percent.What is the projected return on this stock for the next five years according to Blume's formula?

Correct Answer
verified

Which one of the following statements is a correct reflection of the U.S.markets for the period 1926-2010?

Correct Answer
verified

Correct Answer
verified

Which one of the following best defines the variance of an investment's annual returns over a number of years?

Correct Answer
verified

You just sold 600 shares of Wesley, Inc.stock at a price of $32.04 a share.Last year, you paid $30.92 a share to buy this stock.Over the course of the year, you received dividends totaling $1.20 per share.What is your total capital gain on this investment?

Correct Answer
verified

A stock had annual returns of 3.6 percent, -8.7 percent, 5.6 percent, and 12.5 percent over the past four years.Which one of the following best describes the probability that this stock will produce a return of 22 percent or more in a single year?

Correct Answer
verified

Last year, you purchased a stock at a price of $47.10 a share.Over the course of the year, you received $2.40 per share in dividends while inflation averaged 3.4 percent.Today, you sold your shares for $49.50 a share.What is your approximate real rate of return on this investment?

Correct Answer
verified

Exam 12: Return, Risk and the Security Market

A year ago, you purchased 300 shares of Stellar Wood Products, Inc.stock at a price of $8.62 per share.The stock pays an annual dividend of $0.10 per share.Today, you sold all of your shares for $4.80 per share.What is your total dollar return on this investment?

Correct AnswerverifiedShow Answer

Which one of the following statements best defines the efficient market hypothesis?

Correct AnswerverifiedShow Answer

Four months ago, you purchased 1,500 shares of Lakeside Bank stock for $11.20 a share.You have received dividend payments equal to $0.25 a share.Today, you sold all of your shares for $8.60 a share.What is your total dollar return on this investment?

Correct AnswerverifiedShow Answer

The primary purpose of Blume's formula is to:

Correct AnswerverifiedShow Answer

Which one of the following categories of securities had the highest average return for the period 1926-2010?

Correct AnswerverifiedShow Answer

A stock had returns of 11 percent, -18 percent, -21 percent, 20 percent, and 34 percent over the past five years.What is the standard deviation of these returns?

Correct AnswerverifiedShow Answer

Suppose you bought a 10 percent coupon bond one year ago for $950.The face value of the bond is $1,000.The bond sells for $985 today.If the inflation rate last year was 9 percent, what was your total real rate of return on this investment?

Correct AnswerverifiedShow Answer

According to Jeremy Siegel, the real return on stocks over the long-term has averaged about:

Correct AnswerverifiedShow Answer

West Wind Tours stock is currently selling for $48 a share.The stock has a dividend yield of 3.2 percent.How much dividend income will you receive per year if you purchase 200 shares of this stock?

Correct AnswerverifiedShow Answer

One year ago, you purchased a stock at a price of $47.50 a share.Today, you sold the stock and realized a total loss of 22.11 percent.Your capital gain was -$12.70 a share.What was your dividend yield?

Correct AnswerverifiedShow Answer

Over the past fifteen years, the common stock of The Flower Shoppe, Inc.has produced an arithmetic average return of 12.2 percent and a geometric average return of 11.5 percent.What is the projected return on this stock for the next five years according to Blume's formula?

Correct AnswerverifiedShow Answer

Which one of the following statements is a correct reflection of the U.S.markets for the period 1926-2010?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following best defines the variance of an investment's annual returns over a number of years?

Correct AnswerverifiedShow Answer

You just sold 600 shares of Wesley, Inc.stock at a price of $32.04 a share.Last year, you paid $30.92 a share to buy this stock.Over the course of the year, you received dividends totaling $1.20 per share.What is your total capital gain on this investment?

Correct AnswerverifiedShow Answer

A stock had annual returns of 3.6 percent, -8.7 percent, 5.6 percent, and 12.5 percent over the past four years.Which one of the following best describes the probability that this stock will produce a return of 22 percent or more in a single year?

Correct AnswerverifiedShow Answer

Last year, you purchased a stock at a price of $47.10 a share.Over the course of the year, you received $2.40 per share in dividends while inflation averaged 3.4 percent.Today, you sold your shares for $49.50 a share.What is your approximate real rate of return on this investment?

Correct AnswerverifiedShow Answer

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