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Investments Study Set 5

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Quiz 5 : Risk, Return, and the Historical Record

You have been given this probability distribution for the holding-period return for KMP stock: What is the expected variance for KMP stock?
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You purchased a share of stock for $25. One year later, you received$1 as a dividend and sold the share for $29. What was your holding-period return? Free Multiple Choice Answer: Answer: B Which of the following determine(s) the level of real interest rates?I) The supply of savings by households and business firmsII) The demand for investment fundsIII) The government's net supply and/or demand for funds Free Multiple Choice Answer: Answer: D Other things equal, an increase in the government budget deficit Multiple Choice Answer: If the annual real rate of interest is 3.0%, and the expected inflation rate is 4.0%, the nominal rate of interest would be approximately Multiple Choice Answer: If the interest rate paid by borrowers and the interest rate received by savers accurately reflect the realized rate of inflation, Multiple Choice Answer: You have been given this probability distribution for the holding-period return for KMP stock: What is the expected holding-period return for KMP stock? Multiple Choice Answer: Which of the following statement(s) is(are) true?I) The real rate of interest is determined by the supply and demand for funds.II) The real rate of interest is determined by the expected rate of inflation.III) The real rate of interest can be affected by actions of the Fed.IV) The real rate of interest is equal to the nominal interest rate plus the expected rate of inflation. Multiple Choice Answer: The holding-period return (HPR) on a share of stock is equal to Multiple Choice Answer: The risk premium for common stocks Multiple Choice Answer: Historical records regarding return on stocks, Treasury bonds, and Treasury bills between 1926 and 2018 show that Multiple Choice Answer: Over the past year, you earned a nominal rate of interest of 9% on your money. The inflation rate was 3% over the same period. The exact actual growth rate of your purchasing power was Multiple Choice Answer: You have been given this probability distribution for the holding-period return for KMP stock: What is the expected standard deviation for KMP stock? Multiple Choice Answer: Ceteris paribus, a decrease in the demand for loans Multiple Choice Answer: If the nominal return is constant, the after-tax real rate of return Multiple Choice Answer: A year ago, you invested$10,000 in a savings account that pays an annual interest rate of 5%. What is your approximate annual real rate of return if the rate of inflation was 1.5% over the year?
A year ago, you invested $1,000 in a savings account that pays an annual interest rate of 9%. What is your approximate annual real rate of return if the rate of inflation was 2% over the year? Multiple Choice Answer: If the annual real rate of interest is 6%, and the expected inflation rate is 2%, the nominal rate of interest would be approximately Multiple Choice Answer: You purchased a share of stock for$68. One year later, you received $5.00 as a dividend and sold the share for$74.50. What was your holding-period return?