Question 1

Kurt's Toy Co.has total annual returns for the past 5 years of -8.2 percent,11.7 percent,-6.4 percent,18.7 percent,and 6.8 percent.What is the 5-year holding period return?
A)9)00%
B)17.50%
C)22.60%
D)21.67%
E)20.33%

Accepted Answer

Holding period return = [0.918 × 1.117 × 0.936 × 1.187 × 1.068] − 1 = 0.2167,or 21.67%

Question 2

The annual returns for KLO stock for the last three years are 7.4 percent,3.2 percent,and 17.8 percent.Assuming no dividends were paid,what was the 3-year holding period percentage return?
A)28.40%
B)25.70%
C)31.40%
D)30.57%
E)36.52%

Accepted Answer

HPR = (1.074 × 1.032 × 1.178)− 1 = 0.3057 or 30.57%

Question 3

You just sold 600 shares of stock for $42.09 a share.One year ago,you purchased the stock for $44.50 a share and have received dividends totalling $0.68 per share.What is your total capital gain in dollars?
A)−$1,446
B)−$1,038
C)$1,038
D)$1,446
E)$1,854

Accepted Answer

Capital gain = ($42.09 − $44.50)× 600 = −$1,446

Question 4

Suppose a portfolio had an arithmetic average return of 8 percent for a 4-year period.Which one of these statements must be true regarding this portfolio for the period?
A)At least one of the 4 years produced an annual rate of return of 8 percent.
B)If the standard deviation of the portfolio is greater than zero,then the geometric average portfolio return is less than 8 percent.
C)The standard deviation of the portfolio must be lower than the standard deviation of a comparable portfolio that had an arithmetic average return of 9 percent.
D)If the standard deviation of the portfolio is zero,then the geometric average return must also be zero.
E)The holding period return must be less than 8 percent.

Accepted Answer

The geometric average return accounts for the compounding effect and will be less than the arithmetic average return if there is any volatility (i.e., if the standard deviation is greater than zero).

Question 5

One year ago,you purchased a stock at a price of $47.26 a share.Today,you sold the stock and realized a total return of 9.8 percent.Your capital gain was $3.68 a share.What was your dividend yield on this stock?
A)1)25%
B)1)85%
C)2)01%
D)1)75%
E)1)35%

Accepted Answer

Capital gains yield = $3.68 / $47.26 = 0.0779,or 7.79%
Dividend yield = 9.8% − 7.79% = 2.01%

Question 6

One year ago,Barkley's stock sold for $28 a share.During last year,Barkley's paid $1.23 per share in dividends and saw its stock price increase by 7 percent for the year.Today,the firm announced that it will pay $1.30 per share in dividends this year.What do you know with certainty about the performance of Barkley's stock for this year?
A)The total rate of return will be higher this year than it was last year.
B)The dividend yield for this year will be higher than it was last year.
C)The capital gains yield will be positive.
D)The dividend yield for this year will be lower than it was last year.
E)The total rate of return will be lower this year than it was last year.

Accepted Answer

Dividend yield_{Last year} = $1.23 / $28 = 0.0439,or 4.39% Dividend yield_{This year} = $1.30 / (1.07 × $28)= 0.0434,or 4.34%

Question 7

Eight months ago,Isaac purchased 500 shares of stock at a price of $36.20 a share.To date,he has received two quarterly dividends of $.46 a share each.If he sells his shares at the current price of $36.44 a share,what will be his holding period percentage return?
A).55%
B)1.01%
C)3.20%
D)2.78%
E)2.40%

Accepted Answer

Total percentage return = [$36.44 − $36.20 + (2 × $0.46)] / $36.20 = 0.0320,or 3.20%

Question 8

EXO shares are currently selling for $22.08 each.You bought 300 shares one year ago at $18.60 a share and received dividend payments of $0.62 a share.What is the percentage capital gain for the period?
A)14.17%
B)18.71%
C)20.24%
D)23.21%
E)22.04%

Accepted Answer

Capital gain = ($22.08 − $18.60)/ $18.60 = 0.1871,or 18.71%

Question 9

Winslow stock is currently selling for $39 a share.The stock has a dividend yield of 2.3 percent.How much dividend income will you receive per year if you purchase 400 shares of this stock?
A)$248.80
B)$390.47
C)358.80
D)$239.50
E)$360.00

Accepted Answer

Dividend income = $39 × 0.023 × 400 = $358.80

Question 10

The geometric average is probably best applied to ________ performance.
A)past
B)future
C)both past and future
D)neither past nor future
E)estimated

Accepted Answer

The geometric average is best applied to past performance, especially in the context of investment returns, as it accurately reflects the compound growth rate over time.

Question 11

This morning,you purchased one share of stock for $26.The stock pays $.32 per share each quarter as a dividend.What must the stock price be 1 year from now if you want to earn a total return of 16 percent for the year?
A)$29.84
B)$28.88
C)$25.01
D)$27.12
E)$27.46

Accepted Answer

0.16 = [P_{t + 1} − $26 + (4 × $0.32)] / $26 P_{t + 1} = $28.88

Question 12

What lesson can be learned from the 2008 market decline?
A)Stocks and bonds react similarly in downward markets.
B)Diversification lowers risk.
C)Market declines cause high inflation rates.
D)Global markets all react exactly the same.
E)Equity risk premiums will decline in the future.

Accepted Answer

The 2008 market decline demonstrated the importance of diversification in managing risk. A well-diversified portfolio can help mitigate losses during a market downturn by spreading investments across multiple asset classes and sectors. This lesson has been reinforced by subsequent market declines, further highlighting the value of diversification.

Question 13

The average compound return earned per year over a multiyear period is called the ________ average return.
A)real
B)standard
C)arithmetic
D)variant
E)geometric

Accepted Answer

The average compound return earned per year over a multiyear period is best represented by the geometric average return, which takes into account the compounding effect of returns. The other options, such as real, standard, and arithmetic average returns, do not account for the compounding effect and are less precise measures of performance. The option of "variant" is not a recognized term in finance.

Question 14

One year ago,Aimee purchased 300 shares of stock at a price of $21.39 per share.Over the last year,she received total dividend income of $69.What is the dividend yield?
A)2)20%
B)1)08%
C)2)47%
D)0)65%
E)2)14%

Accepted Answer

Dividend yield = ($69 / 300)/ $21.39 = 0.0108,or 1.08%

Question 15

One year ago,Ted purchased 300 shares of stock at $18.09 a share.Today,he received a total of $267 in dividends and sold his shares for a total of $5,250.What was his total rate of return?
A)−3.57%
B)−2.94%
C)−4.43%
D)2)47%
E)1)66%

Accepted Answer

Rate of return = [($5,250 − (300 × $18.09)+ $267] / (300 × $18.09)= 0.0166,or 1.66%

Question 16

In 2008,the S&P 500 index
A)declined in value every month.
B)declined almost 17 percent in 1 month.
C)increased in value during 2 months.
D)never increased by more than 2 percent in any 1 month.
E)increased in value during the first 3 months.

Accepted Answer

In October 2008, the S&P 500 index declined by approximately 17%, marking one of the largest monthly drops during the financial crisis.

Question 17

One year ago,Stacey purchased 200 shares of IXC stock at a price of $42.68 per share.The stock pays an annual dividend of $1.06 per share.Today,she sold all of her shares for $37.43 per share.What is her total dollar return on this investment?
A)−$703
B)−$838
C)$1,022
D)$1,262
E)−$1,050

Accepted Answer

Total dollar return = ($37.43 − $42.68 + $1.06)× 200 = −$838

Question 18

Deltona stock sold for $52.84 a share 1 year ago and pays an annual dividend of $3.20.What does the stock price need to be today for the annual capital gain to be 6.8 percent?
A)$53.23
B)$49.25
C)$56.43
D)$48.63
E)$54.18

Accepted Answer

0.068 = (P_{t + 1} − $52.84)/ $52.84 P_{t + 1} = $56.43

Question 19

In 2008,the S&P 500 index had an annual decline of
A)68 percent.
B)24 percent.
C)46 percent.
D)57 percent.
E)37 percent.

Accepted Answer

In 2008, the S&P 500 index experienced a significant downturn due to the financial crisis, ending the year with an annual decline of approximately 37 percent.

Question 20

The return earned in a typical year over a multiyear period is called the ________ average return.
A)arithmetic
B)standard
C)variant
D)geometric
E)real

Accepted Answer

The arithmetic average return calculates the return earned in a typical year over a multiyear period by summing the annual returns and dividing by the number of years.

Quiz 10: Risk Amcq Return: Lessons From Market History

Kurt's Toy Co.has total annual returns for the past 5 years of -8.2 percent,11.7 percent,-6.4 percent,18.7 percent,and 6.8 percent.What is the 5-year holding period return?

The annual returns for KLO stock for the last three years are 7.4 percent,3.2 percent,and 17.8 percent.Assuming no dividends were paid,what was the 3-year holding period percentage return?

You just sold 600 shares of stock for $42.09 a share.One year ago,you purchased the stock for $44.50 a share and have received dividends totalling $0.68 per share.What is your total capital gain in dollars?

Suppose a portfolio had an arithmetic average return of 8 percent for a 4-year period.Which one of these statements must be true regarding this portfolio for the period?

One year ago,you purchased a stock at a price of $47.26 a share.Today,you sold the stock and realized a total return of 9.8 percent.Your capital gain was $3.68 a share.What was your dividend yield on this stock?

Eight months ago,Isaac purchased 500 shares of stock at a price of $36.20 a share.To date,he has received two quarterly dividends of $.46 a share each.If he sells his shares at the current price of $36.44 a share,what will be his holding period percentage return?

EXO shares are currently selling for $22.08 each.You bought 300 shares one year ago at $18.60 a share and received dividend payments of $0.62 a share.What is the percentage capital gain for the period?

Winslow stock is currently selling for $39 a share.The stock has a dividend yield of 2.3 percent.How much dividend income will you receive per year if you purchase 400 shares of this stock?

The geometric average is probably best applied to ________ performance.

This morning,you purchased one share of stock for $26.The stock pays $.32 per share each quarter as a dividend.What must the stock price be 1 year from now if you want to earn a total return of 16 percent for the year?

What lesson can be learned from the 2008 market decline?

The average compound return earned per year over a multiyear period is called the ________ average return.

One year ago,Aimee purchased 300 shares of stock at a price of $21.39 per share.Over the last year,she received total dividend income of $69.What is the dividend yield?

One year ago,Ted purchased 300 shares of stock at $18.09 a share.Today,he received a total of $267 in dividends and sold his shares for a total of $5,250.What was his total rate of return?

In 2008,the S&P 500 index

One year ago,Stacey purchased 200 shares of IXC stock at a price of $42.68 per share.The stock pays an annual dividend of $1.06 per share.Today,she sold all of her shares for $37.43 per share.What is her total dollar return on this investment?

Deltona stock sold for $52.84 a share 1 year ago and pays an annual dividend of $3.20.What does the stock price need to be today for the annual capital gain to be 6.8 percent?

In 2008,the S&P 500 index had an annual decline of

The return earned in a typical year over a multiyear period is called the ________ average return.