Adv. Corp Fin Ch. 10 Smartbook aid
true
A capital gain on a stock is counted as part of the total return whether or not the gain is realized from selling the stock.
2%
A share of common stock currently sells for $100 and will pay a dividend of $2 at the end of the year. If the price is expected to increase to $113 at the end of one year, what is the stock's current dividend yield?
reduce risk
A well diversified portfolio will help investors ___.
7th
From 1900 to 2010, the U.S. ranked _____ out of 17 countries in terms of having the highest equity risk premium.
5.4
Going back to 1802, the U.S. historical risk premium is, on average, about ____ percent.
7.2
Going back to 1900, the U.S. historical equity risk premium is, on average ___ percent,
[(1.10)(1.20)].5 - 1
If a stock has returns of 10 percent and 20 percent over 2 years, the geometric average rate of return can be calculated by ____.
27
In 2016, the U.S. stock market capitalization was about ______ trillion.
more useful than
Percentage returns are ______ dollar returns.
apply to any amount invested
Percentage returns are more convenient than dollar returns because they ____.
true
T-bills had the lowest risk or variability
returns
The mean return and the standard deviation of returns can be used to describe the distribution of stock
subtracting the annual inflation rate from the annual historical rate of return
Using the Ibbotson SBBI yearbook, year-by-year real returns can be calculated by ___
The stock market is risky. Diversification is important.
What are some important lessons from the 2008 financial crisis?
50%
What is the approximate standard deviation of the returns on an average stock?
arithmetic average
Which measure of return is best for making unbiased estimates of future returns?
sharpe
____ ratio measures the reward-to-risk
forecast
future U.S. equity premiums, assumptions related to the future risk environment and risk aversion of future investors are needed.
16
If stock ABC has a mean return of 10 percent with a standard deviation of 5 percent, then the probability of earning a return greater than 15 percent is about ____ percent.
7.5%
If the arithmetic average return is 10% and the variance of returns is 0.05, find the approximate geometric mean.
return; risk
The Sharpe ratio is a measure of ______ to ______.
true
a frequency distribution of stock returns plots the frequency of occurrence for various ranges of return.
9%
If the arithmetic average return is 13% and the variance of returns is 0.08, find the approximate geometric mean.
has a low level of risk
If the dispersion of returns on a particular security is not very spread out from the security's mean return, the security ____.
5.4%
If the dividend paid over the past year was $2.25 and the beginning stock price was $42 per share, what is the dividend yield?
42
In 2016, the U.S. stock market represented about ______% of the world stock market capitalization
Standard & Poor's Composite Index
In the Ibbotson study, the large-company common stock portfolio is based on the ____.
Ibbotson Sinquefield
In the and study, the large-company common stock portfolio is based on the Standard & Poor's Composite Index.
long-term corporate bonds had less risk or variability than stocks
The Ibbotson SBBI data shows that ___.
true
The equity risk premium s the additional return from bearing risk.
101.2
An investment of $100, returns 10% in year 1, 15% in year 2, and -20% in year 3. What is your future wealth?$
91.00
An investment of $100, returns 40% in year 1, 30% in year 2, and -50% in year 3. What is your future wealth?
a larger
More volatility in returns produces ______ difference between the arithmetic and geometric averages
15%
Suppose you buy a share of stock for $100. At the end of one year the stock price is $114 and a $1 dividend is paid. If you do not sell the stock, your total annual return is ____.
3.4; 11
The 95.4 percent confidence interval for the historical standard error for the true U.S. equity risk premium should be within ___ percent to ___ percent.
large-company stocks small-company stocks U.S. Treasury bills
The Ibbotson SBBI data presents returns from 1948 to the recent past for ___.
small-company stocks generated the highest average return small-company stocks had the highest risk level T-bills, which had the lowest risk, generated the lowest return
The Ibbotson SBBI data show that over the long-term, ___.
NYSE
The Ibbotson SBBI small stock portfolio includes the bottom 20% of ______ listed stocks.
fifth
The Ibbotson SBBI small stock portfolio includes the bottom _________ of NYSE listed stocks.
equity
The ______ risk premium on common stocks represents the additional return from bearing risk.
compare stock returns with the returns on other securities.
The average return on the stock market can be used to ______.
false
The average return on the stock market can be used to find ways to beat the market.
can occasionally be negative is generally positive over the long-term
The excess rate of return ____.
the arithmetic mean minus half of the variance
The geometric average rate of return is approximately equal to ___.
true
The holding period rate of return is the rate of return over some arbitrary investment period.
12.1%
The long-run average return for large-company common stocks for the period 1926 to 2017 was _____.
8.7%
The long-run average risk premium for large-company common stocks for the period 1926 to 2017 was _____.
2.5
The probability of a return being more than two standard deviations below the mean in a normal distribution is approximately ___ percent.
68
The probability of a return being within ± one standard deviation of the mean in a normal distribution is approximately ___ percent.
95
The probability of an outcome being within ± two standard deviations of the mean in a normal distribution is approximately ____ percent.
-7.7 and + 31.9%
The range of returns for a large stock portfolio. within 1 standard deviations, is _______.
square root
The standard deviation is the ______ of the variance.
The distribution is not symmetrical The mean is not equal to the median The distribution can be skewed to the right or left
Which of the following are characteristics of a skewed distribution?
Iceland's stock prices fell by more than 90 percent. Russia's stock prices fell by more than 50 percent.
Which of the following are true about the stock performance of other countries in 2008?
Iceland's stock prices fell by more than 90%. India's stock prices only fell by more than 50%.
Which of the following are true about the stock performance of other countries in 2008?
T-bills sometimes outperform common stocks. Common stocks frequently experience negative returns. The mean return and the standard deviation of returns can be used to describe the distribution of stock returns
Which of the following are true?
Dividends Capital gains
Which of the following are ways to make money by investing in stocks?
Long-term bonds had positive returns t-Bills had positive returns
Which of the following positive financial events occurred in the U.S. in 2008?
Long-term bonds t-Bills Corporate bonds
Which of the following securities had positive returns in the US in 2008?
proceeds from the stock sale plus dividends
Your total year-end value from a one-year investment equals the initial investment plus the total dollar return. It also equals the ___.