Question 1

A stock had the following prices and dividends.What is the geometric average return on this stock?

Accepted Answer

A)  -15.87 percent
B)  -13.71 percent
C)  -13.33 percent
D)  -12.91 percent
E)  -11.48 percentF) B) and E)
G) A) and B)

Question 2

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) All of the above
G) D) and E)

Question 3

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) All of the above
G) C) and E)

Question 4

Which one of the following is defined by its mean and its standard deviation?

Accepted Answer

A)  arithmetic nominal return
B)  geometric real return
C)  normal distribution
D)  variance
E)  risk premiumF) A) and B)
G) A) and C) C

Question 5

Which of the following correspond to a wide frequency distribution?
I.relatively low risk
II.relatively low rate of return
III.relatively high standard deviation
IV.relatively large risk premium

Accepted Answer

A)  II only
B)  III only
C)  I and II only
D)  II and III only
E)  III and IV onlyF) None of the above
G) C) and D)

Question 6

Which one of the following statements is correct based on the historical record for the period 1926-2010?

Accepted Answer

A)  The standard deviation of returns for small-company stocks was double that of large-company stocks.
B)  U.S. Treasury bills had a zero standard deviation of returns because they are considered to be risk-free.
C)  Long-term government bonds had a lower return but a higher standard deviation on average than did long-term corporate bonds.
D)  Inflation was less volatile than the returns on U.S. Treasury bills.
E)  Long-term government bonds underperformed intermediate-term government bonds.F) B) and E)
G) C) and D) C

Question 7

The U.S.Securities and Exchange Commission periodically charges individuals with insider trading and claims those individuals have made unfair profits.Given this,you would be most apt to argue that the markets are less than _____ form efficient.

Accepted Answer

A)  weak
B)  semiweak
C)  semistrong
D)  strong
E)  perfectF) A) and E)
G) None of the above

Question 8

Over the past five years,a stock produced returns of 11 percent,14 percent,4 percent,-9 percent,and 5 percent.What is the probability that an investor in this stock will not lose more than 10 percent in any one given year?

Accepted Answer

A)  greater than 0.5 but less than 1.0 percent
B)  greater than 1.0 percent but less than 2.5 percent
C)  greater than 2.5 percent but less than 16 percent
D)  greater than 84 percent but less than 97.5 percent
E)  greater than 95 percentF) A) and D)
G) A) and C)

Question 9

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) A) and E)
G) A) and C) E

Question 10

According to theory,studying historical stock price movements to identify mispriced stocks:

Accepted Answer

A)  is effective as long as the market is only semistrong form efficient.
B)  is effective provided the market is only weak form efficient.
C)  is ineffective even when the market is only weak form efficient.
D)  becomes ineffective as soon as the market gains semistrong form efficiency.
E)  is ineffective only in strong form efficient markets.F) C) and D)
G) A) and B)

Question 11

If you excel in analyzing the future outlook of firms,you would prefer the financial markets be ____ form efficient so that you can have an advantage in the marketplace.

Accepted Answer

A)  weak
B)  semiweak
C)  semistrong
D)  strong
E)  perfectF) B) and C)
G) B) and D)

Question 12

Six months ago,you purchased 100 shares of stock in Global Trading at a price of $38.70 a share.The stock pays a quarterly dividend of $0.15 a share.Today,you sold all of your shares for $40.10 per share.What is the total amount of your dividend income on this investment?

Accepted Answer

A)  $15
B)  $30
C)  $45
D)  $50
E)  $60F) D) and E)
G) B) and C)

Question 13

The common stock of Air United,Inc.,had annual returns of 15.6 percent,2.4 percent,-11.8 percent,and 32.9 percent over the last four years,respectively.What is the standard deviation of these returns?

Accepted Answer

A)  13.29 percent
B)  14.14 percent
C)  16.50 percent
D)  17.78 percent
E)  19.05 percentF) B) and D)
G) A) and D)

Question 14

Individuals who continually monitor the financial markets seeking mispriced securities:

Accepted Answer

A)  earn excess profits over the long-term.
B)  make the markets increasingly more efficient.
C)  are never able to find a security that is temporarily mispriced.
D)  are overwhelmingly successful in earning abnormal profits.
E)  are always quite successful using only historical price information as their basis of evaluation.F) C) and D)
G) A) and B)

Question 15

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

Question 16

Based on past 23 years,Westerfield Industrial Supply's common stock has yielded an arithmetic average rate of return of 10.5 percent.The geometric average return for the same period was 8.57 percent.What is the estimated return on this stock for the next 4 years according to Blume's formula?

Accepted Answer

A)  8.70 percent
B)  8.92 percent
C)  9.13 percent
D)  9.38 percent
E)  10.24 percentF) A) and B)
G) A) and C)

Question 17

You own 400 shares of Western Feed Mills stock valued at $51.20 per share.What is the dividend yield if your annual dividend income is $352?

Accepted Answer

A)  1.68 percent
B)  1.72 percent
C)  1.83 percent
D)  1.13 percent
E)  1.21 percentF) A) and B)
G) A) and D)

Question 18

Which one of the following was the least volatile over the period of 1926-2010?

Accepted Answer

A)  large-company stocks
B)  inflation
C)  long-term corporate bonds
D)  U.S. Treasury bills
E)  intermediate-term government bondsF) D) and E)
G) All of the above

Question 19

Over a 30-year period an asset had an arithmetic return of 13 percent and a geometric return of 10.5 percent.Using Blume's formula,what is your best estimate of the future annual returns over the next 5 years?

Accepted Answer

A)  11.18 percent
B)  12.27 percent
C)  11.84 percent
D)  12.66 percent
E)  12.46 percentF) A) and B)
G) A) and E)

Question 20

A stock has an expected rate of return of 13 percent and a standard deviation of 21 percent.Which one of the following best describes the probability that this stock will lose at least half of its value in any one given year?

Accepted Answer

A)  0.1 percent
B)  0.5 percent
C)  1.0 percent
D)  2.5 percent
E)  5.0 percentF) B) and E)
G) A) and B)

Exam 12: Some Lessons From Capital Market History

A stock had the following prices and dividends.What is the geometric average return on 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

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

Correct AnswerverifiedShow Answer

Which one of the following is defined by its mean and its standard deviation?

Correct AnswerverifiedC

Which of the following correspond to a wide frequency distribution? I.relatively low risk II.relatively low rate of return III.relatively high standard deviation IV.relatively large risk premium

Correct AnswerverifiedShow Answer

Which one of the following statements is correct based on the historical record for the period 1926-2010?

Correct AnswerverifiedC

The U.S.Securities and Exchange Commission periodically charges individuals with insider trading and claims those individuals have made unfair profits.Given this,you would be most apt to argue that the markets are less than _____ form efficient.

Correct AnswerverifiedShow Answer

Over the past five years,a stock produced returns of 11 percent,14 percent,4 percent,-9 percent,and 5 percent.What is the probability that an investor in this stock will not lose more than 10 percent in any one given year?

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 AnswerverifiedE

According to theory,studying historical stock price movements to identify mispriced stocks:

Correct AnswerverifiedShow Answer

If you excel in analyzing the future outlook of firms,you would prefer the financial markets be ____ form efficient so that you can have an advantage in the marketplace.

Correct AnswerverifiedShow Answer

Six months ago,you purchased 100 shares of stock in Global Trading at a price of $38.70 a share.The stock pays a quarterly dividend of $0.15 a share.Today,you sold all of your shares for $40.10 per share.What is the total amount of your dividend income on this investment?

Correct AnswerverifiedShow Answer

The common stock of Air United,Inc.,had annual returns of 15.6 percent,2.4 percent,-11.8 percent,and 32.9 percent over the last four years,respectively.What is the standard deviation of these returns?

Correct AnswerverifiedShow Answer

Individuals who continually monitor the financial markets seeking mispriced securities:

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

Based on past 23 years,Westerfield Industrial Supply's common stock has yielded an arithmetic average rate of return of 10.5 percent.The geometric average return for the same period was 8.57 percent.What is the estimated return on this stock for the next 4 years according to Blume's formula?

Correct AnswerverifiedShow Answer

You own 400 shares of Western Feed Mills stock valued at $51.20 per share.What is the dividend yield if your annual dividend income is $352?

Correct AnswerverifiedShow Answer

Which one of the following was the least volatile over the period of 1926-2010?

Correct AnswerverifiedShow Answer

Over a 30-year period an asset had an arithmetic return of 13 percent and a geometric return of 10.5 percent.Using Blume's formula,what is your best estimate of the future annual returns over the next 5 years?

Correct AnswerverifiedShow Answer

A stock has an expected rate of return of 13 percent and a standard deviation of 21 percent.Which one of the following best describes the probability that this stock will lose at least half of its value in any one given year?

Correct AnswerverifiedShow Answer

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