Question 1

One year ago,you purchased a stock at a price of $32 a share.Today,you sold the stock and realized a total return of 25%.Your capital gain was $6 a share.What was your dividend yield on this stock?
A)1.25%
B)3.75%
C)6.25%
D)18.75%
E)21.25%

Accepted Answer

Capital gains yield = $6 F1F1F1S1F1F1F10 $32 = 18.75%;Dividend yield = 25% - 18.75% = 6.25%

Question 2

Estimates using the arithmetic average will probably tend to _____ values over the long-term while estimates using the geometric average will probably tend to _____ values over the short-term.
A)overestimate;overestimate
B)overestimate;underestimate
C)underestimate;overestimate
D)underestimate;underestimate
E)accurately;accurately

Accepted Answer

Estimates using the arithmetic average will probably overestimate values over the long-term because it gives equal weight to all periods, including periods with extreme values that may not occur again. On the other hand, estimates using the geometric average can handle compounding and tend to underestimate values over the short-term due to the compounding effect. Therefore, only option B represents the correct choices.

Question 3

Which of the following statements are correct concerning the variance of the annual returns on an investment?
I.The larger the variance,the more the actual returns tend to differ from the average return.
II.The larger the variance,the larger the standard deviation.
III.The larger the variance,the greater the risk of the investment.
IV.The larger the variance,the higher the expected return.
A)I and III only
B)II,III,and IV only
C)I,III,and IV only
D)I,II,and III only
E)I,II,III,and IV

Accepted Answer

The answer of Which of the following statements are correct...

Question 4

The dollar value of the world stock market capitalization,from largest to smallest is:
A)Europe and Middle East,Americas,Asia-Pacific
B)Americas,Europe and Middle East,Asia-Pacific
C)Americas,Asia-Pacific,Europe and Middle East

Accepted Answer

The Americas, led by the United States, have the largest stock market capitalization, followed by the Asia-Pacific region, and then Europe and the Middle East.

Question 5

You just sold 200 shares of Langley,Inc.stock at a price of $38.75 a share.Last year you paid $41.50 a share to buy this stock.Over the course of the year,you received dividends totaling $1.64 per share.What is your capital gain on this investment?
A)-$550
B)-$222
C)-$3
D)$550
E)$878

Accepted Answer

Capital gain = ($38.75 - $41.50)F1F1F1S1F1F1F10 200 = -$550 (capital loss)

Question 6

One year ago,you purchased a stock at a price of $32.50.The stock pays quarterly dividends of $.40 per share.Today,the stock is worth $34.60 per share.What is the total amount of your dividend income to date from this investment?
A)$0.40
B)$1.60
C)$2.10
D)$2.50
E)$3.70

Accepted Answer

Dividend income = $.40 F1F1F1S1F1F1F10 4 = $1.60

Question 7

Which of the following statements concerning the standard deviation are correct?
I.The greater the standard deviation,the lower the risk.
II.The standard deviation is a measure of volatility.
III.The higher the standard deviation,the less certain the rate of return in any one given year.
IV.The higher the standard deviation,the higher the expected return.
A)I and III only
B)II,III,and IV only
C)I,III,and IV only
D)I,II,and III only
E)I,II,III,and IV

Accepted Answer

Statement I is incorrect because higher standard deviation indicates higher risk. Statement II is correct because standard deviation measures the variability or volatility of returns. Statement III is correct because higher standard deviation means greater uncertainty in returns. Statement IV is incorrect because there is no direct relationship between the standard deviation and expected return.

Question 8

Six months ago,you purchased 100 shares of stock in ABC Co.at a price of $43.89 a share.ABC stock pays a quarterly dividend of $.10 a share.Today,you sold all of your shares for $45.13 per share.What is the total amount of your capital gains on this investment?
A)$1.24
B)$1.64
C)$40.00
D)$124.00
E)$164.00

Accepted Answer

Capital gains = ($45.13 - $43.89)F1F1F1S1F1F1F10 100 = $124

Question 9

The variance of returns is computed by dividing the sum of the:
A)squared deviations by the number of returns minus one.
B)average returns by the number of returns minus one.
C)average returns by the number of returns plus one.
D)squared deviations by the average rate of return.
E)squared deviations by the number of returns plus one.

Accepted Answer

The variance of returns is calculated by taking the sum of the squared deviations from the mean returns, and dividing it by the number of returns minus one. This formula gives an unbiased estimate of the sample variance.

Question 10

You purchased 300 shares of Deltona,Inc.stock 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 on this stock?
A)4.06%
B)4.23%
C)4.68%
D)8.55%
E)8.91%

Accepted Answer

Cost = 300 F1F1F1S1F1F1F10 $44.90 = $13,470;Capital gains yield = ($14,040 - $13,470)F1F1F1S1F1F1F10 $13,470 = 4.23%

Question 11

How much of total world stock market capitalization is from the United States in 2013?
A)approximately 10%
B)approximately 25%
C)approximately 35%
D)approximately 45%
E)approximately 55%

Accepted Answer

The United States has the largest stock market in the world, accounting for approximately 35% of total world stock market capitalization in 2013.

Question 12

Which country has the lowest stock market risk premium?
A)Denmark
B)Belgium
C)Switzerland
D)Spain
E)Norway

Accepted Answer

The answer of Which country has the lowest stock market...

Question 13

A capital gain occurs when:
A)the selling price is less than the purchase price.
B)the purchase price is less than the selling price.
C)there is no dividend paid.
D)there is no income component of return.
E)never,as they cannot exist.

Accepted Answer

A capital gain occurs when the selling price of an asset is higher than its purchase price, resulting in a profit for the owner. Option B correctly states that the purchase price is less than the selling price. Options A, C, D, and E are incorrect.

Question 14

Capital market history shows us that the average return relationship from lowest to highest between securities is:
A)inflation,corporate bonds,Treasuries,small company stocks,large company stocks.
B)Treasury bills,inflation,small company stocks,large company stocks.
C)Treasury bills,corporate bonds,government bonds,large common stocks,small company stocks.
D)Treasury bills,government bonds,corporate bonds,large common stocks,small company stocks.
E)There is no ordering.

Accepted Answer

Capital market history shows that the average return relationship from lowest to highest between securities is Treasury bills, government bonds, corporate bonds, large common stocks, and small company stocks. This order is based on the level of risk and expected return of each security, with Treasury bills being the safest but offering the lowest returns, while small company stocks are the riskiest but offer the potential for higher returns.

Question 15

The risk premium is computed by ______ the average return for the investment.
A)subtracting the inflation rate from
B)adding the inflation rate to
C)subtracting the average return on the U.S.Treasury bill from
D)adding the average return on the U.S.Treasury bill to
E)subtracting the average return on long-term government bonds from

Accepted Answer

The risk premium is the extra return earned by taking on more risk. Therefore, it is computed by subtracting the average return on the U.S. Treasury bill (which is considered a risk-free investment) from the average return for the investment.

Question 16

The standard deviation on small company stocks:
I.is greater than the standard deviation on large company stocks.
II.is less than the standard deviation on large company stocks.
III.had an average value of about 33% for the period 1926 to 2011.
IV.had an average value of about 20% for the period 1926 to 2011.
A)I and III only
B)I and II only
C)II and III only
D)II and IV only
E)I and IV only

Accepted Answer

The answer of The standard deviation on small company stocks:
I.is...

Question 17

The Zolo Co.just declared that it is increasing its annual dividend from $1.00 per share to $1.25 per share.If the stock price remains constant,then:
A)the capital gains yield will decrease.
B)the capital gains yield will increase.
C)the dividend yield will increase.
D)the dividend yield will also remain constant.
E)neither the capital gains yield nor the dividend yield will change.

Accepted Answer

Since the dividend has increased, the dividend yield (which is the annual dividend per share divided by the stock price) will increase. However, the capital gains yield (which is the change in the stock price divided by the original stock price) will not necessarily change unless there is some other factor affecting the stock price.

Question 18

Winslow,Inc.stock is currently selling for $40 a share.The stock has a dividend yield of 3.8%.How much dividend income will you receive per year if you purchase 500 shares of this stock?
A)$152
B)$190
C)$329
D)$760
E)$1,053

Accepted Answer

Dividend income = $40 F1F1F1S1F1F1F10 .038 F1F1F1S1F1F1F10 500 = $760

Question 19

You purchased 200 shares of stock at a price of $36.72 per share.Over the last year,you have received total dividend income of $322.What is the dividend yield?
A)3.2%
B)4.4%
C)6.8%
D)9.2%
E)11.4%

Accepted Answer

Dividend per share = $322 F1F1F1S1F1F1F10 200 = $1.61;Dividend yield = $1.61 F1F1F1S1F1F1F10 $36.72 = 4.4%

Question 20

A year ago,you purchased 300 shares of IXC Technologies,Inc.stock at a price of $9.03 per share.The stock pays an annual dividend of $.10 per share.Today,you sold all of your shares for $28.14 per share.What is your total dollar return on this investment?
A)$5,703
B)$5,733
C)$5,753
D)$5,763
E)$5,853

Accepted Answer

Total dollar return = ($28.14 - $9.03 + $.10)F1F1F1S1F1F1F10 300 = $5,763

Quiz 10: Risk and Return: Lessons From Market History

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

Estimates using the arithmetic average will probably tend to _ values over the long-term while estimates using the geometric average will probably tend to _ values over the short-term.

The dollar value of the world stock market capitalization,from largest to smallest is:

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

One year ago,you purchased a stock at a price of $32.50.The stock pays quarterly dividends of $.40 per share.Today,the stock is worth $34.60 per share.What is the total amount of your dividend income to date from this investment?

Six months ago,you purchased 100 shares of stock in ABC Co.at a price of $43.89 a share.ABC stock pays a quarterly dividend of $.10 a share.Today,you sold all of your shares for $45.13 per share.What is the total amount of your capital gains on this investment?

The variance of returns is computed by dividing the sum of the:

You purchased 300 shares of Deltona,Inc.stock 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 on this stock?

How much of total world stock market capitalization is from the United States in 2013?

Which country has the lowest stock market risk premium?

A capital gain occurs when:

Capital market history shows us that the average return relationship from lowest to highest between securities is:

The risk premium is computed by ______ the average return for the investment.

The Zolo Co.just declared that it is increasing its annual dividend from $1.00 per share to $1.25 per share.If the stock price remains constant,then:

Winslow,Inc.stock is currently selling for $40 a share.The stock has a dividend yield of 3.8%.How much dividend income will you receive per year if you purchase 500 shares of this stock?

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

A year ago,you purchased 300 shares of IXC Technologies,Inc.stock at a price of $9.03 per share.The stock pays an annual dividend of $.10 per share.Today,you sold all of your shares for $28.14 per share.What is your total dollar return on this investment?