Question 1

The variance of the returns on the Index from 2000 to 2009 is closest to:

Accepted Answer

D) R_annual= 11ea7e60_15a5_832d_ba34_81ca8fc8685a_TB1624_11 = 11ea7e60_15a5_832e_ba34_3bc4b4ae0400_TB1624_11 = 11ea7e60_15a5_832f_ba34_f96272afa9c2_TB1624_11 = 8.8% 11ea7e60_15a5_8330_ba34_e5549bb71f22_TB1624_00 Variance = SUM of (R - R)^2/^T - 1 = 0.3405116/9 = 0.0378346

Question 2

Suppose that you want to use the 10 year historical average return on the Index to forecast the expected future return on the Index.The 95% confidence interval for your estimate of the expect return is closest to:

Accepted Answer

D) R_annual= 11ea7e60_15a6_bbce_ba34_634610902900_TB1624_11 = 11ea7e60_15a6_bbcf_ba34_139e935dcb66_TB1624_11 = 8.8% 11ea7e60_15a6_bbd0_ba34_f35f72c4b05f_TB1624_00 Variance = SUM of (R - R)^2/^T - 1 = 0.3405116/9 = 0.0378346 Standard deviation = 11ea7e60_15a6_bbd1_ba34_7f2503050ae1_TB1624_11 = 11ea7e60_15a6_e2e2_ba34_f7a2879a5045_TB1624_11 = 0.1945112 Standard error = Standard Deviation/ 11ea7e60_15a6_e2e3_ba34_f9f822cf8421_TB1624_11 = 0.1945112/ 11ea7e60_15a6_e2e4_ba34_45d94eb9e870_TB1624_11 = 0.0615 or 6.15% 95% Confidence Interval = mean return + or - 2 standard errors, so lower bound = .0878 - 2 × 0.0615 = -3.5% upper bound = .0878 + 2 × 0.0615 = 21.1%

Question 3

Use the table for the question(s) below.
Consider the following realized annual returns:
 
-Using the data provided in the table,calculate the average annual return,the variance of the annual returns,and the standard deviation of the average returns for Stock B from 2000 to 2009.

Accepted Answer

The answer of Use the table for the question(s) below.
Consider...

Question 4

Use the table for the question(s) below.
Consider the following realized annual returns:
 
-Suppose that you want to use the 10 year historical average return on Stock B to forecast the expected future return on Stock B.Calculate the 95% confidence interval for your estimate of the expect return.

Accepted Answer

The answer of Use the table for the question(s) below.
Consider...

Question 5

The geometric average annual return on Stock A from 2000 to 2009 is closest to:

Accepted Answer

A) Geometric Average = 11ea7e60_15a7_581e_ba34_db7940d2dac1_TB1624_11 - 1
= 11ea7e60_15a7_581f_ba34_7558b9e80677_TB1624_11 - 1 = 1.124476 - 1 = 0.124476

Question 6

Use the table for the question(s) below.
Consider the following realized annual returns:
 
-Using the data provided in the table,calculate the average annual return,the variance of the annual returns,and the standard deviation of the average returns for the market from 2000 to 2009.

Accepted Answer

The answer of Use the table for the question(s) below.
Consider...

Question 7

The geometric average annual return on the Index from 2000 to 2009 is closest to:

Accepted Answer

C) Geometric Average = 11ea7e60_15a7_310c_ba34_fb3accf55e4f_TB1624_11 - 1
= 11ea7e60_15a7_310d_ba34_8fb4b290c16d_TB1624_11 - 1 = 1.071067 - 1 = 0.071067

Question 8

The excess return if the difference between the average return on a security and the average return for:

Accepted Answer

Excess return is typically calculated as the difference between the return on a security and the risk-free rate, which is often represented by the return on Treasury Bills.

Question 9

Use the table for the question(s) below.
Consider the following realized annual returns:
 
-The average annual return on the Index from 2000 to 2009 is closest to:

Accepted Answer

D) R_annual= 11ea7e60_15a5_3507_ba34_5788f7120290_TB1624_11 = 11ea7e60_15a5_5c18_ba34_0fefcc08d8cb_TB1624_11 = 11ea7e60_15a5_5c19_ba34_4fb506c6f251_TB1624_11 = 8.82%

Question 10

Suppose that you want to use the 10 year historical average return on Stock A to forecast the expected future return on Stock A.The 95% confidence interval for your estimate of the expect return is closest to:

Accepted Answer

B) R_annual= 11ea7e60_15a7_09f5_ba34_f501c0b7f0e0_TB1624_11 = 11ea7e60_15a7_09f6_ba34_d7c381ae2553_TB1624_11 = 16.45% 11ea7e60_15a7_09f7_ba34_b313fd4d8cfe_TB1624_00 Variance = SUM of (R - R)^2/^T - 1 = 0.9907165/9 = 0.1100796 Standard deviation = 11ea7e60_15a7_09f8_ba34_190c233cfdf1_TB1624_11 = 11ea7e60_15a7_09f9_ba34_099593282570_TB1624_11 = 0.3317825 Standard error = Standard Deviation/ 11ea7e60_15a7_09fa_ba34_4da0f10fccee_TB1624_11 = 0.3317825/ 11ea7e60_15a7_310b_ba34_2bade24e6349_TB1624_11 = 0.1049 or 10.49% 95% Confidence Interval = mean return + or - 2 standard errors, so lower bound = .1638 - 2 × 0.1049= -4.5% upper bound = .1638 + 2 × 0.1049 = 37.4%

Question 11

The standard deviation of the returns on Stock A from 2000 to 2009 is closest to:

Accepted Answer

A) R_annual= 11ea7e60_15a5_f86a_ba34_2f12ead3da07_TB1624_11 = 11ea7e60_15a5_f86b_ba34_2113d57b59ef_TB1624_11 = 16.45% 11ea7e60_15a6_1f7c_ba34_9f5020dc387e_TB1624_00 Variance = SUM of( R - R)^2/^T - 1 = 0.9907165/9 = 0.1100796 Standard deviation = 11ea7e60_15a6_1f7d_ba34_917d629e0dcd_TB1624_11 = 11ea7e60_15a6_1f7e_ba34_8937ac61e6e9_TB1624_11 = 0.3317825

Question 12

Use the table for the question(s) below.
Consider the following Price and Dividend data for General Electric Company:
 
-Assume that you purchased Ford Motor Company stock at the closing price on December 31,2008 and sold it at the closing price on December 30,2009.Your realized annual return for the year 2009 is closest to:

Accepted Answer

A)
 11ea7e60_15a5_3505_ba34_4ffb12fa04d6_TB1624_00 The last column in the table contains the cumulative product of (1 + returns)

Question 13

Use the table for the question(s) below.
Consider the following realized annual returns:
 
-The average annual return on Stock A from 2000 to 2009 is closest to:

Accepted Answer

B) R_annual= 11ea7e60_15a5_5c1a_ba34_73ca4a62cdbd_TB1624_11 = 11ea7e60_15a5_5c1b_ba34_f9844c4f55e6_TB1624_11 = 11ea7e60_15a5_5c1c_ba34_499aa1b24250_TB1624_11 = 16.45%

Question 14

The standard deviation of the returns on the Index from 2000 to 2009 is closest to:

Accepted Answer

A) R_annual= 11ea7e60_15a5_d154_ba34_897ba8bade7b_TB1624_11 = 11ea7e60_15a5_d155_ba34_659214fdd50a_TB1624_11 = 11ea7e60_15a5_d156_ba34_7d1499b1dba0_TB1624_11 = 8.8% 11ea7e60_15a5_d157_ba34_bf8c2871c0c6_TB1624_00 Variance = SUM of (R - R)^2/^T - 1 = 0.3405116/9 = 0.0378346 Standard deviation = 11ea7e60_15a5_d158_ba34_812f624fa708_TB1624_11 = 11ea7e60_15a5_f869_ba34_f53d81d3f355_TB1624_11 = 0.1945112

Question 15

The variance of the returns on Stock A from 2000 to 2009 is closest to:

Accepted Answer

C) R_annual= 11ea7e60_15a5_aa41_ba34_05cf32058802_TB1624_11 = 11ea7e60_15a5_aa42_ba34_c75131cce395_TB1624_11 = 16.45% 11ea7e60_15a5_aa43_ba34_31c9e44df311_TB1624_00 Variance = SUM of (R - R)^2/^T - 1 = 0.9907165/9 = 0.1100796

Question 16

Use the table for the question(s) below.
Consider the following Price and Dividend data for J. P. Morgan Chase:
 
-Assume that you purchased J.P.Morgan Chase stock at the closing price on December 31,2008 and sold it at the closing price on December 30,2009.Calculate your realized annual return is for the year 2005.

Accepted Answer

The answer of Use the table for the question(s) below.
Consider...

Question 17

Suppose that you want to use the 10 year historical average return on the Index to forecast the expected future return on the Index.The standard error of your estimate of the expected return is closest to:

Accepted Answer

D) R_annual= 11ea7e60_15a6_1f7f_ba34_038f4437428e_TB1624_11 = 11ea7e60_15a6_4690_ba34_3748972c08a6_TB1624_11 = 11ea7e60_15a6_4691_ba34_5f317de59fdf_TB1624_11 = 8.8% 11ea7e60_15a6_4692_ba34_7fafe1d04ae6_TB1624_00 Variance = SUM of (R - R)^2/^T - 1 = 0.3405116/9 = 0.0378346 Standard deviation = 11ea7e60_15a6_4693_ba34_cf16fc18f7c6_TB1624_11 = 11ea7e60_15a6_4694_ba34_cf22672422ab_TB1624_11 = 0.1945112 Standard error = Standard Deviation/ 11ea7e60_15a6_4695_ba34_ed8ee4de4832_TB1624_11 = 0.1945112/ 11ea7e60_15a6_6da6_ba34_4b01c9124e5d_TB1624_11 = 0.0615 or 6.15%

Question 18

Use the table for the question(s) below.
Consider the following Price and Dividend data for General Electric Company:
 
-Assume that you purchased General Electric Company stock at the closing price on December 31,2008 and sold it after the dividend had been paid at the closing price on January 26,2009.Your total return rate (yield)for this period is closest to:

Accepted Answer

D) = (P₁+ D₁ - P₀)_/P₀ = (13.35 + .10 - 14.64)/14.64 = -.08128

Question 19

Suppose that you want to use the 10 year historical average return on Stock A to forecast the expected future return on Stock A.The standard error of your estimate of the expected return is closest to:

Accepted Answer

B) R_annual= 11ea7e60_15a6_6da7_ba34_01c3b776853c_TB1624_11 = 11ea7e60_15a6_6da8_ba34_11838e0bfc74_TB1624_11 = 16.45% 11ea7e60_15a6_94b9_ba34_b3e9a39cafb6_TB1624_00 Variance = SUM of (R - R)²^/^T - 1 = 0.9907165/9 = 0.1100796 Standard deviation = 11ea7e60_15a6_94ba_ba34_9b9598947318_TB1624_11 = 11ea7e60_15a6_94bb_ba34_bd09857bb7c0_TB1624_11 = 0.3317825 Standard error = Standard Deviation/ 11ea7e60_15a6_94bc_ba34_a1e6bf7d40f9_TB1624_11 = 0.3317825/ 11ea7e60_15a6_94bd_ba34_e7bc53485cb0_TB1624_11 = 0.1049 or 10.49%

Question 20

Use the table for the question(s) below.
Consider the following realized annual returns:
 
-Suppose that you want to use the 10 year historical average return on the Market to forecast the expected future return on the Market.Calculate the 95% confidence interval for your estimate of the expect return.

Accepted Answer

The answer of Use the table for the question(s) below.
Consider...

Quiz 10: Capital Markets and the Pricing of Risk

The variance of the returns on the Index from 2000 to 2009 is closest to:

Suppose that you want to use the 10 year historical average return on the Index to forecast the expected future return on the Index.The 95% confidence interval for your estimate of the expect return is closest to:

Use the table for the question(s) below. Consider the following realized annual returns: -Using the data provided in the table,calculate the average annual return,the variance of the annual returns,and the standard deviation of the average returns for Stock B from 2000 to 2009.

Use the table for the question(s) below. Consider the following realized annual returns: -Suppose that you want to use the 10 year historical average return on Stock B to forecast the expected future return on Stock B.Calculate the 95% confidence interval for your estimate of the expect return.

The geometric average annual return on Stock A from 2000 to 2009 is closest to:

Use the table for the question(s) below. Consider the following realized annual returns: -Using the data provided in the table,calculate the average annual return,the variance of the annual returns,and the standard deviation of the average returns for the market from 2000 to 2009.

The geometric average annual return on the Index from 2000 to 2009 is closest to:

The excess return if the difference between the average return on a security and the average return for:

Use the table for the question(s) below. Consider the following realized annual returns: -The average annual return on the Index from 2000 to 2009 is closest to:

Suppose that you want to use the 10 year historical average return on Stock A to forecast the expected future return on Stock A.The 95% confidence interval for your estimate of the expect return is closest to:

The standard deviation of the returns on Stock A from 2000 to 2009 is closest to:

Use the table for the question(s) below. Consider the following realized annual returns: -The average annual return on Stock A from 2000 to 2009 is closest to:

The standard deviation of the returns on the Index from 2000 to 2009 is closest to:

The variance of the returns on Stock A from 2000 to 2009 is closest to:

Suppose that you want to use the 10 year historical average return on the Index to forecast the expected future return on the Index.The standard error of your estimate of the expected return is closest to:

Suppose that you want to use the 10 year historical average return on Stock A to forecast the expected future return on Stock A.The standard error of your estimate of the expected return is closest to: