Question 1

Allen Gibbs purchased 50 shares of ABC Corp. ,each worth $110.If the price of the share increases to $135 after a year,which of the following will be the capital gain if Allen sells all his shares?
A) $1,250
B) $25
C) $6,750
D) $5,500

Accepted Answer

The capital gain is calculated by subtracting the total purchase price from the total selling price. Allen bought 50 shares at $110 each, totaling $5,500 (50 * $110). He sold them at $135 each, totaling $6,750 (50 * $135). The capital gain is $6,750 - $5,500 = $1,250.

Question 2

Donna Warne purchased a share of company X at $700 one year ago.The share is now trading at $850.Calculate the percent capital gain if Donna sells her share at the current price.
A) 17.6%
B) 150%
C) 6.7%
D) 21.4%

Accepted Answer

The capital gain is calculated as follows:

Capital Gain = Selling Price - Purchase Price
Capital Gain = $850 - $700
Capital Gain = $150

The percent capital gain is calculated as follows:

Percent Capital Gain = (Capital Gain/Purchase Price) x 100%
Percent Capital Gain = ($150/$700) x 100%
Percent Capital Gain = 21.4%

Therefore, the answer is D) 21.4%.

Question 3

The ________ price index uses quantities evaluated in the base period to compute the weighted aggregate price index.

Accepted Answer

The answer of The ________ price index uses quantities evaluated...

Question 4

Emily Myers purchased a share of company X at $700 one year ago and earned a dividend of $50 during the year.The share is trading now at $850.Calculate Emily's return from investment if she sells her share at $850.
A) 7.14%
B) 21.43%
C) 28.57%
D) 14.29%

Accepted Answer

Emily's total return from investment can be calculated using the formula: [(selling price + dividends received - purchase price) / purchase price] x 100%

Substituting the values, we get:
[(850 + 50 - 700)/700] x 100% = 28.57%

Therefore, Emily's return from investment is 28.57%, which is closest to option C - 28.57%.

Question 5

Jack Simmons is expecting to earn a 0.34% return on his investment in a government bond that matures next year.If the inflation rate during the time of maturity is expected to be 7%,what will be the real rate of return from his investment?
A) 6.64%
B) - 3.36%
C) - 6.22%
D) 25%

Accepted Answer

The answer of Jack Simmons is expecting to earn a...

Question 6

The returns to which of the following investments comprises only on capital gains?
A) Shares
B) Bonds
C) Real estate investments
D) Treasury bills

Accepted Answer

The answer of The returns to which of the following...

Question 7

Joanna Robertson bought a share of XYZ Corp.at $200 last year.She was paid a dividend of $30 during the same year.However,the same share is trading at $280 this year.Calculate Joanna's capital gains percent yield if she sells the shares at $280.
A) 80%
B) 15%
C) 40%
D) 28.57%

Accepted Answer

The answer of Joanna Robertson bought a share of XYZ...

Question 8

Which of the following types of returns capture the changes in purchasing power?
A) Nominal returns
B) Real returns
C) Income yield
D) Capital gains yield

Accepted Answer

Real returns capture the changes in purchasing power by adjusting for changes in inflation. Nominal returns only reflect the actual monetary return on an investment, without considering the effect of inflation. Income yield and capital gains yield both refer to different components of investment returns, but they do not specifically capture changes in purchasing power.

Question 9

The ______ price index is used to represent relative price movements for a group of items.

Accepted Answer

The answer of The ______ price index is used to...

Question 10

Which of the following statements is true of investment returns?
A) A change in the price of the underlying asset usually has no impact on returns to investment.
B) Income yield always accounts for the bulk of the returns from an investment.
C) The higher the price of the asset during the time of purchase,the lower the returns from that investment.
D) The higher the income yield,the lower the overall returns from that investment.

Accepted Answer

The statement "The higher the price of the asset during the time of purchase, the lower the returns from that investment" is true. This is because the price paid for an asset affects the potential for future gains, as a higher purchase price means there is less room for growth. Factors such as changes in the price of the underlying asset and income yield also impact investment returns, but they do not always have a consistent relationship with returns. Therefore, options A, B, and D are incorrect.

Question 11

A ______ series is obtained by adjusting the given time series for changes in prices,or inflation.

Accepted Answer

The answer of A ______ series is obtained by adjusting...

Question 12

The ________ rate is the percentage rate of change of a price index over time.

Accepted Answer

The answer of The ________ rate is the percentage rate...

Question 13

The Paasche index uses the ______ period quantities in deriving the weights.

Accepted Answer

The answer of The Paasche index uses the ______ period...

Question 14

Calculate the nominal percent return from an investment of $300 in a share whose price increases to $375 after a year.
A) 75%
B) 20%
C) 25%
D) 16.67%

Accepted Answer

The nominal percent return can be calculated as:
Nominal percent return = ((ending value - beginning value)/beginning value) * 100%
= ((375 - 300)/300) * 100%
= 25%

Question 15

If the average price for gasoline in 2001 and 2006 was $1.46 per gallon and $2.59,respectfully,the simple price index for 2006 is _____%.

Accepted Answer

The answer of If the average price for gasoline in...

Question 16

The adjusted close price of a share is now $67.A year back,the adjusted close price of the same share was $50.What is the investment percent return for someone who holds 10 of these shares today?
A) 34%
B) 17%
C) 20%
D) 25.37%

Accepted Answer

The investment percent return is calculated by the formula: [(Current Price - Original Price) / Original Price] * 100. So, for one share, the return is [(67 - 50) / 50] * 100 = 34%. Since the return percentage does not depend on the number of shares, holding 10 shares also results in a 34% return.

Question 17

Which of the following correctly identifies the Fisher equation?
A) r = (1 + R)/ (1 + i)
B) r =R / (1 + i)
C) 1 + r = R / (1 + i)
D) 1 + r = (1 + R)/ (1 + i)

Accepted Answer

The Fisher equation is expressed as 1 + r = (1 + R)/ (1 + i), which indicates the relationship between nominal interest rates, inflation, and real interest rates.

Question 18

Which of the following investment options is the most profitable in percentage terms?
A) A government bond with a coupon payment of $10,purchased at $100 and sold at $90 after a year.
B) A government bond with a coupon payment of $15,purchased at $175 and sold at $155 after a year.
C) A share with a dividend payment of $5,purchased at $50 and sold at $60 after a year.
D) A Treasury bill purchased at $160 and sold at $175 after a year.

Accepted Answer

For option A, the bond was purchased at $100 and sold at $90, which represents a 10% loss. The annual coupon payment of $10 represents a gain of 10%, resulting in a net return of 0%.

For option B, the bond was purchased at $175 and sold at $155, representing a 11.43% loss. The annual coupon payment of $15 represents a gain of 8.57% (15/175), resulting in a net return of -2.86%.

For option C, the share was purchased at $50 and sold at $60, representing a 20% gain. The annual dividend payment of $5 represents a gain of 10%, resulting in a net return of 30%.

For option D, the Treasury bill was purchased at $160 and sold at $175, representing a 9.37% gain.

Therefore, option C (the share with a dividend payment of $5, purchased at $50 and sold at $60 after a year) is the most profitable in percentage terms, with a net return of 30%.

Question 19

Joanna Robertson bought a share of XYZ Corp.at $200 last year.She was paid a dividend of $30 during the same year.However,the same share is trading at $280 this year.Calculate the investment percent yield if Joanna sells the share at $280.
A) 70%
B) 110%
C) 15%
D) 55%

Accepted Answer

The answer of Joanna Robertson bought a share of XYZ...

Question 20

Joanna Robertson bought a share of XYZ Corp.at $200 last year.She was paid a dividend of $30 during the same year.However,the same share is trading at $280 this year.Calculate Joanna's income percent yield from holding the share for a year.
A) 15%
B) 40%
C) 55%
D) 30%

Accepted Answer

The answer of Joanna Robertson bought a share of XYZ...

Quiz 19: Returns, Index Numbers and Inflation

Allen Gibbs purchased 50 shares of ABC Corp. ,each worth $110.If the price of the share increases to $135 after a year,which of the following will be the capital gain if Allen sells all his shares?

Donna Warne purchased a share of company X at $700 one year ago.The share is now trading at $850.Calculate the percent capital gain if Donna sells her share at the current price.

The ________ price index uses quantities evaluated in the base period to compute the weighted aggregate price index.

Emily Myers purchased a share of company X at $700 one year ago and earned a dividend of $50 during the year.The share is trading now at $850.Calculate Emily's return from investment if she sells her share at $850.

Jack Simmons is expecting to earn a 0.34% return on his investment in a government bond that matures next year.If the inflation rate during the time of maturity is expected to be 7%,what will be the real rate of return from his investment?

The returns to which of the following investments comprises only on capital gains?

Joanna Robertson bought a share of XYZ Corp.at $200 last year.She was paid a dividend of $30 during the same year.However,the same share is trading at $280 this year.Calculate Joanna's capital gains percent yield if she sells the shares at $280.

Which of the following types of returns capture the changes in purchasing power?

The ______ price index is used to represent relative price movements for a group of items.

Which of the following statements is true of investment returns?

A ______ series is obtained by adjusting the given time series for changes in prices,or inflation.

The ________ rate is the percentage rate of change of a price index over time.

The Paasche index uses the ______ period quantities in deriving the weights.

Calculate the nominal percent return from an investment of $300 in a share whose price increases to $375 after a year.

If the average price for gasoline in 2001 and 2006 was $1.46 per gallon and $2.59,respectfully,the simple price index for 2006 is _____%.

The adjusted close price of a share is now $67.A year back,the adjusted close price of the same share was $50.What is the investment percent return for someone who holds 10 of these shares today?

Which of the following correctly identifies the Fisher equation?

Which of the following investment options is the most profitable in percentage terms?

Joanna Robertson bought a share of XYZ Corp.at $200 last year.She was paid a dividend of $30 during the same year.However,the same share is trading at $280 this year.Calculate the investment percent yield if Joanna sells the share at $280.

Joanna Robertson bought a share of XYZ Corp.at $200 last year.She was paid a dividend of $30 during the same year.However,the same share is trading at $280 this year.Calculate Joanna's income percent yield from holding the share for a year.