Question 1

What are the arithmetic and geometric average returns for a stock with annual returns of 4%,10%,-6%,and 19%?
A)5.89%; 6.25%
B)6.25%; 5.89%
C)6.75%; 6.35%
D)8.3%; 5.89%
E)8.3%; 6.25%

Accepted Answer

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

Question 2

You bought 100 shares of stock at $25 each.At the end of the year,you received a total of $500 in dividends,and your stock was worth $2,500 total.What was total dollar capital gain and total dollar return?
A)$0; $500
B)$400; $900
C)$500; $900
D)$900; $2,500
E)None of the above.

Accepted Answer

The capital gain is $0 because the stock's value did not increase ($2,500 - $2,500). The total dollar return is $500, which is the dividend received.

Question 3

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 answer of Over the past five years,a stock produced...

Question 4

If the expected return on the market is 11.5%,then using the historical risk premium on large stocks of 8.6%,the current risk-free rate is:
A)2.9%
B)7.4%
C)8.4%
D)10.6%
E)12.6%

Accepted Answer

The risk-free rate can be calculated by subtracting the historical risk premium from the expected return on the market: 11.5% - 8.6% = 2.9%.

Question 5

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)8.8%; 6.1%
E)8.6%; 6.3%

Accepted Answer

Arithmetic average return = (21%+8%+(-32%)+41%+5%)/5 = 8.6%
Geometric average return = [(1+21%)(1+8%)(1-32%)(1+41%)(1+5%)]^(1/5) - 1 = 5.6%.
Therefore, choice C, 8.6% and 5.6%, is the correct answer.

Question 6

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 7

The total annual returns on large company common stocks averaged 11.8% from 1926 to 2009 small company stocks averaged 16.6%,long-term government bonds averaged 5.8%,while Treasury Bills averaged 3.7%.What was the average risk premium earned by long-term government bonds and small company stocks,respectively?
A)1.8%; 11.9%
B)2.1%; 12.9%
C)4.4%; 13.9%
D)9.5%; 1.8%
E)None of the above.

Accepted Answer

The answer of The total annual returns on large company...

Question 8

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 9

The return on your portfolio over the last 5 years were -5%,20%,0%,10% and 5%.What is the arithmetic average return?
A)5.0%
B)6.0%
C)7.5%
D)8.0%
E)10.0%

Accepted Answer

The answer of The return on your portfolio over the...

Question 10

The returns for IMB over the last 3 years are given below.Assuming no dividends were paid,what was the 3-year holding period return? Given the following information:
Year 1 return = 10%,Year 2 return = 15%,Year 3 return = 12%.
A)12.3%
B)13.9%
C)15.8%
D)41.7%
E)46.5%

Accepted Answer

The holding period return is calculated by multiplying the individual returns and taking the geometric mean of the product, then subtracting 1.

HPR = [(1 + 10%) × (1 + 15%) × (1 + 12%)] ^ (1/3) – 1

HPR = 1.417 - 1 = 0.417

HPR = 41.7%

Therefore, the correct answer is D) 41.7%.

Question 11

A stock has an expected rate of return of 7.3% and a standard deviation of 5.4%.Which one of the following best describes the probability that this stock will lose 9% 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 9% or more can be calculated using the normal distribution. The z-score for a -9% return is approximately -3.02, which corresponds to a probability of less than 0.5%.

Question 12

Excelsior shares are currently selling for $25.75 each.You bought 200 shares one year ago at $24 and received dividend payments of $1.60 per share.What was your percentage capital gain this year?
A)4.17%
B)6.80%
C)10.42%
D)104.17%
E)110.42%

Accepted Answer

First, let's calculate the total amount spent on the 200 shares one year ago:

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

Now, let's calculate the total dividend payments received:

200 shares x $1.60 per share = $320

The total earnings from selling the shares this year would be:

200 shares x $25.75 per share = $5,150

To calculate the capital gain, we need to subtract the initial investment and the total dividend payments from the total earnings and then divide by the initial investment, expressed as a percentage:

(($5,150 - $4,800 - $320) / $4,800) x 100 = 6.80%

Therefore, the percentage capital gain for this year is 6.80%, which corresponds to choice B.

Question 13

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 14

You bought 100 shares of stock at $25 each.At the end of the year,you received a total of $500 in dividends,and your stock was worth $2,500 total.What was your total return?
A)zero
B)20%
C)50%
D)90%
E)None of the above.

Accepted Answer

Total return = (Dividends + Capital gain) / Initial investment= (500 + 2500 - 2500) / 2500= 500 / 2500= 0.2= 20%

Question 15

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 answer of A stock had returns of 8%,39%,11%,and -24%...

Question 16

Kids Toy Co.has had total returns over the past five years of -4%,7%,-2%,19%,and 12%.What was the arithmetic average return on this stock?
A)5.40%
B)5.50%
C)6.15%
D)6.40%
E)6.75%

Accepted Answer

The answer of Kids Toy Co.has had total returns over...

Question 17

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 18

A stock had returns of 8%,12%,-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)5.9%
D)7.3%
E)8.2%

Accepted Answer

To calculate geometric average return, we multiply all the returns and take the nth root, where n is the number of years. 
In this case, the calculation is: 
Geometric average return = (1.08*1.12*0.89*1.17)^(1/4) - 1 = (1.2713)^(1/4) - 1 = 0.059 ≈ 5.9%
Therefore, the answer is (C) 5.9%.

Question 19

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 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, we need to add the capital gain (increase in stock price) and dividend income, then divide this by the initial investment.

Capital gain = $25 - $24 = $1 per share 
Dividend income = $1.50 per share

Total gain = $1 + $1.50 = $2.50 per share 
Total gain on 200 shares = $2.50 x 200 = $500

Initial investment = $24 x 200 = $4800

Total rate of return = total gain / initial investment 
= $500 / $4800 
= 0.1042 or 10.42% (rounded to nearest hundredth)

Therefore, the answer is C.

Question 20

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 answer of A stock had returns of 11%,1%,9%,15%,and -6%...

Quiz 10: Risk and Return Lessons From Market History

What are the arithmetic and geometric average returns for a stock with annual returns of 4%,10%,-6%,and 19%?

You bought 100 shares of stock at $25 each.At the end of the year,you received a total of $500 in dividends,and your stock was worth $2,500 total.What was total dollar capital gain and total dollar return?

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?

If the expected return on the market is 11.5%,then using the historical risk premium on large stocks of 8.6%,the current risk-free rate is:

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

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 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?

The return on your portfolio over the last 5 years were -5%,20%,0%,10% and 5%.What is the arithmetic average return?

The returns for IMB over the last 3 years are given below.Assuming no dividends were paid,what was the 3-year holding period return? Given the following information: Year 1 return = 10%,Year 2 return = 15%,Year 3 return = 12%.

A stock has an expected rate of return of 7.3% and a standard deviation of 5.4%.Which one of the following best describes the probability that this stock will lose 9% or more in any one given year?

Excelsior shares are currently selling for $25.75 each.You bought 200 shares one year ago at $24 and received dividend payments of $1.60 per share.What was your percentage capital gain this year?

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?

You bought 100 shares of stock at $25 each.At the end of the year,you received a total of $500 in dividends,and your stock was worth $2,500 total.What was your total return?

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?

Kids Toy Co.has had total returns over the past five years of -4%,7%,-2%,19%,and 12%.What was the arithmetic average return on this stock?

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

A stock had returns of 8%,12%,-11%,and 17% over the past four years.What is the geometric average return for this time period?

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 total rate of 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?