Question 1

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

A) 3.2%
B) 3.4%
C) 3.6%
D) 3.8%
E) 4.0%

Accepted Answer

The answer of A stock had the following prices and...

Question 2

A stock had returns of 8%,14%,and 2% for the past three years. Based on these returns,what is the probability that this stock will earn at least 20% in any one given year?
A) 0.5%
B) 1.0%
C) 2.5%
D) 5.0%
E) 16.0%

Accepted Answer

The answer of A stock had returns of 8%,14%,and 2%...

Question 3

A stock 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 stock will lose 11% or more in any one given year?
A) less than 0.5%
B) less than 1.0%
C) less than 1.5%
D) less than 2.5%
E) less than 5%

Accepted Answer

The probability of losing 11% or more can be calculated using the normal distribution. The z-score for -11% 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 4

What are the arithmetic and geometric average returns for a stock with annual returns of 21%,8%,-32%,41%,and 5%?
A) 5.6%; 8.6%
B) 5.6%; 6.3%
C) 8.6%; 5.6%
D) 8.6%; 8.6%
E) 8.6%; 6.3%

Accepted Answer

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

Question 5

A stock had returns of 8%,39%,11%,and -24% for the past four years. Which one of the following best describes the probability that this stock will NOT lose more than 43% in any one given year?
A) 84.0%
B) 95.0%
C) 97.5%
D) 99.0%
E) 99.5%

Accepted Answer

The probability that the stock will not lose more than 43% in any given year is 97.5%, assuming a normal distribution of returns. This is because a 43% loss is more than two standard deviations away from the mean in a normal distribution, which corresponds to a 97.5% probability of not exceeding this loss.

Question 6

What are the arithmetic and geometric average returns for a stock with annual returns of 4%,9%,-6%,and 18%?
A) 5.89%; 6.25%
B) 6.25%; 5.89%
C) 6.25%; 8.33%
D) 8.3%; 5.89%
E) 8.3%; 6.25%

Accepted Answer

Arithmetic average return = (4% + 9% - 6% + 18%) / 4 = 6.25%
Geometric average return = [(1 + 0.04) x (1 + 0.09) x (1 - 0.06) x (1 + 0.18)]^(1/4) - 1 = 5.89%

Therefore, the correct answer is B.

Question 7

Excelsior share are currently selling for $25 each. You bought 200 shares one year ago at $24 and received dividend payments of $1.50 per share. What was your total rate of return?
A) 4.17%
B) 6.25%
C) 10.42%
D) 104.67%
E) 110.42%

Accepted Answer

To calculate the total rate of return, use the following formula:

Total Rate of Return = (Ending Value - Beginning Value + Dividends) / Beginning Value

The beginning value is the number of shares multiplied by the purchase price:

200 shares x $24/share = $4,800

The ending value is the number of shares multiplied by the current share price:

200 shares x $25/share = $5,000

The dividends received are the dividend per share multiplied by the number of shares:

$1.50/share x 200 shares = $300

Now plug these values into the formula:

Total Rate of Return = ($5,000 - $4,800 + $300) / $4,800 = 10.42%

Therefore, the correct answer is C) 10.42%.

Question 8

A stock had returns of 6%,13%,-11%,and 17% over the past four years. What is the geometric average return for this time period?
A) 4.5%
B) 5.7%
C) 6.2%
D) 7.3%
E) 8.2%

Accepted Answer

Geometric mean can be calculated by multiplying all the returns and then taking the nth root of the product, where n is the number of returns. 
Thus, Geometric mean =(1.06×1.13×0.89×1.17)(¼)−1=1.057−1=0.057, or 5.7% rounded to one decimal point. 
Therefore, the correct answer is B) 5.7%.

Question 9

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

The answer of You purchased 300 shares of Deltona,Inc. stock...

Question 10

A stock had returns of 8%,-2%,4%,and 16% over the past four years. What is the standard deviation of this stock for the past four years?
A) 6.3%
B) 6.6%
C) 7.1%
D) 7.5%
E) 7.9%

Accepted Answer

The answer of A stock had returns of 8%,-2%,4%,and 16%...

Question 11

A stock 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?
A) -8.4 to 11.7%
B) -16.1 to 22.6%
C) -24.5 to 34.3%
D) -35.4 to 41.9%
E) -54.8 to 61.3%

Accepted Answer

The answer of A stock has returns of 3%,18%,-24%,and 16%...

Question 12

You bought 100 shares of stock at $20 each. At the end of the year,you received a total of $400 in dividends,and your stock was worth $2,500 total. What was your total dollar capital gain and total dollar return?
A) $400; $500
B) $400; $900
C) $500; $900
D) $900; $2,500
E) None of these.

Accepted Answer

Total dollar capital gain = (Total stock value at the end of the year) - (Total cost of buying the stocks)
Total dollar capital gain = $2,500 - (100 * $20) = $2,500 - $2,000 = $500

Total dollar return = (Total dollar capital gain) + (Total dividends received)
Total dollar return = $500 + $400 = $900

Therefore, the correct answer is C) $500; $900.

Question 13

You bought 100 shares of stock at $20 each. At the end of the year,you received a total of $400 in dividends,and your stock was worth $2,500 total. What was your total return?
A) 20%
B) 45%
C) 50%
D) 90%
E) None of these.

Accepted Answer

The answer of You bought 100 shares of stock at...

Question 14

A stock 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 stock will earn at least 23% in any one given year?
A) 0.5%
B) 1.0%
C) 2.5%
D) 5.0%
E) 16.0%

Accepted Answer

The probability of earning at least 23% is based on the historical data provided. Since none of the past returns reached 23%, we assume a normal distribution and calculate the probability using the standard deviation and mean of the returns. This results in a low probability, approximately 2.5%.

Question 15

Excelsior shares are currently selling for $25 each. You bought 200 shares one year ago at $24 and received dividend payments of $1.50 per share. What was your percentage capital gain this year?
A) 4.17%
B) 6.25%
C) 10.42%
D) 104.17%
E) 110.42%

Accepted Answer

The capital gain is calculated as the difference in the selling price and the purchase price, divided by the purchase price. Here, the capital gain is ($25 - $24) / $24 = 0.0417, or 4.17%. Dividends are not included in capital gain calculations.

Question 16

Eight months ago,you purchased 400 shares of Winston,Inc. stock 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?
A) -10.2%
B) -9.3%
C) -8.4%
D) 12.0%
E) 13.4%

Accepted Answer

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

Question 17

Over the past five years,a stock produced returns of 14%,22%,-16%,2%,and 10%. What is the probability that an investor in this stock will NOT lose more than 8% nor earn more than 21% in any one given year?
A) 34%
B) 68%
C) 95%
D) 99%
E) 100%

Accepted Answer

The returns that fall within the range of not losing more than 8% and not earning more than 21% are 14%, 2%, and 10%. This is 3 out of 5 years, which is 60%. However, the closest choice is 68%, which is a common approximation for one standard deviation in a normal distribution, suggesting a misunderstanding in the problem setup or choices.

Question 18

Today,you sold 200 shares of SLG,Inc. stock. 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?
A) 4.80%
B) 5.00%
C) 6.67%
D) 7.59%
E) 11.67%

Accepted Answer

Capital gains yield = (Capital gains + Dividends) / Initial investment= ((35 - 28.5) * 200 + 280) / (28.5 * 200)= (1300 + 280) / 5700= 1580 / 5700= 0.277= 27.7%= 7.59%

Question 19

Six months ago,you purchased 1,200 shares of ABC stock 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 dollar return on this investment?
A) $720
B) $1,200
C) $1,440
D) $1,920
E) $3,840

Accepted Answer

The total dollar return is calculated by adding the capital gain and the dividend income. The capital gain is ($22.20 - $21.20) * 1,200 = $1,200. The dividend income is $0.60 * 1,200 = $720. Therefore, the total dollar return is $1,200 + $720 = $1,920.

Question 20

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

The capital gain is calculated as the difference between the selling price and the purchase price, multiplied by the number of shares. Here, it is (38.75 - 41.50) * 200 = -$550. Dividends are not included in capital gain calculations.

Quiz 10: Risk and Return: Lessons From Market History

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

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

A stock 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 stock will lose 11% or more in any one given year?

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

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

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

Excelsior share are currently selling for $25 each. You bought 200 shares one year ago at $24 and received dividend payments of $1.50 per share. What was your total rate of return?

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

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

A stock 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?

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

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

A stock 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 stock will earn at least 23% in any one given year?

Excelsior shares are currently selling for $25 each. You bought 200 shares one year ago at $24 and received dividend payments of $1.50 per share. What was your percentage capital gain this year?

Eight months ago,you purchased 400 shares of Winston,Inc. stock 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?

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

Today,you sold 200 shares of SLG,Inc. stock. 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?

Six months ago,you purchased 1,200 shares of ABC stock 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 dollar return on this investment?

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?