Question 1

Today, you sold 200 shares of SLG plc.Your total return on these shares is 12.5%.You purchased the shares one year ago at a price of £28.50 a share.You have received a total of £280 in dividends
Over the course of the year.What is your capital gains yield on this investment?

Accepted Answer

Capital gains yield = (Capital gain / Purchase price) x 100= ((Sale price - Purchase price) / Purchase price) x 100= ((£28.50 x 200 x 1.125) - (£28.50 x 200)) / (£28.50 x 200) x 100= 7.59%

Question 2

You just sold 200 shares of Langley at a price of £38.75 a share.Last year you paid £41.50 a share to buy this equity.Over the course of the year, you received dividends totaling £1.64 per share.What
Is your capital gain on this investment?

Accepted Answer

The capital gain (or in this case, loss) is calculated by subtracting the purchase price from the selling price, then adjusting for dividends received. Here, the calculation is (38.75 - 41.50) * 200 + (1.64 * 200) = -550. This represents a capital loss, not a gain.

Question 3

An equity has returns of 3%, 18%, -24%, and 16% for the past four years.Based on this information, what is the 95% probability range for any one given year?

Accepted Answer

The answer of An equity has returns of 3%, 18%,...

Question 4

One year ago, you purchased an equity at a price of £32 a share.Today, you sold the equity and realized a total return of 25%.Your capital gain was £6 a share.What was your dividend yield?

Accepted Answer

Total return = (Income + Capital gain) / Initial investment
Here, Income refers to dividends.
Let's assume you bought 1 equity at a price of £32 a share. So your initial investment was £32.
Since you realized a total return of 25%, your total selling price per share = 32 + 0.25*32 = £40.
Your capital gain was £6 a share, so your selling price per share can also be calculated as = Initial price per share + capital gain per share = £32 + £6 = £38.
Therefore, Income (dividend) per share = Total selling price per share - Capital gain per share = £40 - £6 = £34.
Dividend yield = (Dividend per share / Initial investment per share) * 100
Dividend yield = (34/32) * 100 = 106.25%
Therefore, the dividend yield is 6.25%. (Option C)

Question 5

A share had returns of 6%, 13%, -11%, and 17% over the past four years.What is the geometric average return for this time period?

Accepted Answer

To calculate the geometric average return, we can use the following formula:
Geometric Average Return = ((1 + R1) x (1 + R2) x ... x (1 + Rn))^(1/n) - 1
where R1, R2, ..., Rn are the annual returns for each year.
Plugging in the numbers:
Geometric Average Return = ((1 + 0.06) x (1 + 0.13) x (1 - 0.11) x (1 + 0.17))^(1/4) - 1
Geometric Average Return = (1.08 x 1.13 x 0.89 x 1.17)^(1/4) - 1
Geometric Average Return = 1.057 - 1
Geometric Average Return = 0.057 or 5.7%
Therefore, the best choice is B.

Question 6

Eight months ago, you purchased 400 shares of Winston plc at a price of £54.90 a share.The company pays quarterly dividends of £.50 a share.Today, you sold all of your shares for £49.30 a
Share.What is your total percentage return on this investment?

Accepted Answer

The answer of Eight months ago, you purchased 400 shares...

Question 7

Winslow plc is currently selling for £40 a share.The equity has a dividend yield of 3.8%.How much dividend income will you receive per year if you purchase 500 shares?

Accepted Answer

The answer of Winslow plc is currently selling for £40...

Question 8

A equity had returns of 11%, 1%, 9%, 15%, and -6% for the past ﬁve years.Based on these returns, what is the approximate probability that this equity will earn at least 23% in any one given year?

Accepted Answer

The historical returns do not show any year with a return close to 23%. Assuming a normal distribution, the probability of achieving such a high return is low, around 2.5%.

Question 9

Six months ago, you purchased 1,200 shares of ABC plc for €21.20 a share.You have received dividend payments equal to €.60 a share.Today, you sold all of your shares for €22.20 a share.
What is your total monetary return on this investment?

Accepted Answer

The total monetary return includes both the capital gain and the dividends received. Capital gain is (€22.20 - €21.20) * 1,200 = €1,200. Dividends are €0.60 * 1,200 = €720. Total return is €1,200 + €720 = €1,920.

Question 10

A share had returns of 8%, 39%, 11%, and -24% for the past four years.Which one of the following best describes the probability that this share will NOT lose more than 43% in any one given year?

Accepted Answer

The answer of A share had returns of 8%, 39%,...

Question 11

You purchased 200 shares at a price of £36.72 each.Over the last year, you have received total dividend income of £322.What is the dividend yield?

Accepted Answer

First, we need to find the total cost of the investment:

200 shares x £36.72 = £7,344

Next, we can use the formula for dividend yield:

Dividend Yield = (Total Dividend / Total Cost of Investment) x 100

Dividend Yield = (£322 / £7,344) x 100

Dividend Yield = 4.389%

Rounding to one decimal place, the dividend yield is 4.4%. Therefore, the best choice is B.

Question 12

An equity had returns of 8%, -2%, 4%, and 16% over the past four years.What is the standard deviation of this equity for the past four years?

Accepted Answer

The answer of An equity had returns of 8%, -2%,...

Question 13

Over the past ﬁve years, a share produced returns of 14%, 22%, -16%, 2%, and 10%.What is the probability that an investor in this share will NOT lose more than 8% nor earn more than 21% in any
One given year?

Accepted Answer

To calculate the probability of the investor not losing more than 8% nor earning more than 21%, we have to find the range of returns between -8% and 21%. Therefore, we need to calculate the standard deviation of the given returns. 
Using the formula for standard deviation, we get:
Mean return (μ) = (14+22-16+2+10)/5 = 6.4%
Standard deviation (σ) = [ (14-6.4)^2 + (22-6.4)^2 + (-16-6.4)^2 + (2-6.4)^2 + (10-6.4)^2 ] / 5
= 16.96%
Now, we have to find the probability of the returns being between -8% and 21% with a mean return of 6.4% and a standard deviation of 16.96%. 
Using the standard normal distribution table, we can find the probability to be 0.68 or 68%. Therefore, the best choice is B.

Question 14

An equity has an expected rate of return of 8.3% and a standard deviation of 6.4%.Which one of the following best describes the probability that this equity will lose 11% or more in any one given year?

Accepted Answer

The probability of losing 11% or more is calculated using the normal distribution. The z-score for a -11% return is (-11% - 8.3%) / 6.4% = -3.03125. A z-score of -3.03125 corresponds to a probability of less than 0.5% in the standard normal distribution.

Question 15

An equity had returns of 8%, 14%, and 2% for the past three years.Based on these returns, what is the probability that this equity will earn at least 20% in any one given year?

Accepted Answer

The probability is calculated based on historical data. Since none of the past returns reached 20%, the probability is 0%. However, the closest option to 0% is 2.5%, which is likely intended to represent a very low probability.

Question 16

You bought 100 shares at £20 each.At the end of the year, you received a total of £400 in dividends, and your shares was worth £2,500 total.What was your total return?

Accepted Answer

The answer of You bought 100 shares at £20 each.At...

Question 17

Accepted Answer

The given alphanumeric code is irrelevant to solving the problem. The correct answer can be found by calculating the percentage increase from 320 to 332.
[(332-320)/320] * 100 = 3.75%
The closest answer choice is B, 3.4%.

Question 18

What are the arithmetic and geometric average returns for a share with annual returns of 21%, 8%, -32%, 41%, and 5%?

Accepted Answer

The answer of What are the arithmetic and geometric average...

Question 19

You purchased 300 shares of Deltona for £44.90 a share.You have received a total of £630 in dividends and £14,040 in proceeds from selling the shares.What is your capital gains yield?

Accepted Answer

The capital gains yield is calculated by finding the difference between the selling price and the purchase price, then dividing by the purchase price. The purchase price for 300 shares is 300 * £44.90 = £13,470. The proceeds from selling the shares are £14,040. The capital gain is £14,040 - £13,470 = £570. The capital gains yield is (£570 / £13,470) * 100 = 4.23%.

Question 20

What are the arithmetic and geometric average returns for a share with annual returns of 4%, 9%, -6%, and 18%?

Accepted Answer

Arithmetic average return = (4% + 9% - 6% + 18%)/4 = 6.25%
Geometric average return = [(1+4%)(1+9%)(1-6%)(1+18%)]^(1/4) - 1 = 5.89% 
Therefore, option B is the correct choice as it provides both answers correctly.

Quiz 9: Risk and Return: Lessons From Market History

Today, you sold 200 shares of SLG plc.Your total return on these shares is 12.5%.You purchased the shares one year ago at a price of £28.50 a share.You have received a total of £280 in dividends Over the course of the year.What is your capital gains yield on this investment?

You just sold 200 shares of Langley at a price of £38.75 a share.Last year you paid £41.50 a share to buy this equity.Over the course of the year, you received dividends totaling £1.64 per share.What Is your capital gain on this investment?