Module 4 - FINA 363

If a portfolio had a return of 15%, the risk-free asset return was 5%, and the standard deviation of the portfolio's excess return was 30%, the Sharpe measure would be a.) 0.33 b.) 0.25 c.) 0.20 d.) 0.45 e.) 0.35

a.) 0.33

You purchase a share of CAT stock for $90. One year later, after receiving a dividend of $4, you sell the stock for $97. What was your holding-period return? a.) 12.22% b.) 13.33% c.) 5.56% d.) 14.44%

a.) 12.22%

You purchase a share of Boeing stock for $90. One year later, after receiving a dividend of $3, you sell the stock for $92. What was your holding-period return? a.) 5.56% b.) 3.33% c.) 4.44% d.) None of the options are correct e.) 2.22%

a.) 5.56%

You have been given this probability distribution for the holding-period return for GM stock: Stock of the Economy / Probability / HPR // Boom / 0.40 / 30% // Normal Growth / 0.40 / 11% // Recession / 0.20 / -10% What is the expected standard deviation for GM stock? a.) 15.25% b.) 14.87% c.) 16.91% d.) 13.79% e.) 16.13%

b.) 14.87%

You have been given this probability distribution for the holding-period return for KMP stock: Stock of the Economy / Probability / HPR // Boom / 0.30 / 18% // Normal Growth / 0.50 / 12% // Recession / 0.20 / -5% What is the expected variance for KMP stock? a.) 69.96 b.) 66.04 c.) 77.04 d.) 78.45 e.) 63.72

b.) 66.04

An investors purchased a bond 45 days ago for $985. He received $15 in interest and sold the bond for $980. What is the holding-period return on his investment? a.) 0.50% b.) 1.92% c.) 1.02% d.) 0.01%

c.) 1.02%

You have been given this probability distribution for the holding-period return for KMP stock: Probability / HPR // Boom / 0.30 / 18% // Normal Growth / 0.50 / 12% // Recession / 0.20 / -5% What is the expected holding-period return for KMP stock? a.) 11.54% b.) 9.32% c.) 10.40% d.) 11.63% e.) 10.88%

c.) 10.40%

The risk premium for common stocks a.) is negative, as common stocks are risky b.) cannot be zero, for investors would be unwilling to invest in common stocks and is negative, as common stocks are risky c.) cannot be zero, for investors would be unwilling to invest in common stocks and must always be positive, in theory d.) must always be positive, in theory e.) cannot be zero, for investors would be unwilling to invest in common stocks

c.) cannot be zero, for investors would be unwilling to invest in common stocks and must always be positive, in theory

The holding-period return (HPR) on a share of stock is equal to a.) the capital gain yield during the period plus the inflation rate b.) the change in stock price c.) the capital gain yield during the period plus the dividend yield d.) the current yield plus the dividend yield e.) the dividend yield plus the risk premium

c.) the capital gain yield during the period plus the dividend yield

If a portfolio had a return of 11%, the risk-free asset return was 6%, and the standard deviation of the portfolio's excess returns was 25%, the risk premium would be a.) 6% b.) 35% c.) 14% d.) 5% e.) 21%

d.) 5%

You purchased a share of stock for $20. One year later, you received $1 as a dividend and sold the share for $29. What was your holding-period return? a.) 5% b.) 40% c.) 45% d.) 50% e.) None of the options are correct.

d.) 50%

You have been given this probability distribution for the holding-period return for a stock: Stock of the Economy / Probability / HPR // Boom / 0.40 / 22% // Normal Growth / 0.35 / 11% // Recession / 0.25 / -9% What is the expected holding-period return for the stock? a.) 8.33% b.) 11.67% c.) 12.4% d.) None of the options are correct e.) 9.56%

d.) None of the options are correct

You purchased a share of CSCO stock for $20. One year later, you received $2 as a dividend and sold the share for $31. What was your holding-period return? a.) 60% b.) 45% c.) 50% d.) None of the options are correct e.) 40%

d.) None of the options are correct

You have been given this probability distribution for the holding-period return for a stock: Stock of the Economy / Probability / HPR // Boom / 0.40 / 22% // Normal Growth / 0.35 / 11% // Recession / 0.25 / -9% What is the expected variance for the stock? a.) 177.04% b.) 142.07% c.) 128.17% d.) 189.96% e.) None of the options are correct

e.) None of the options are correct

You purchased a share of stock for $120. One year later, you received $1.82 as a dividend and sold the share for $136. What was your holding-period return? a.) 15.67% b.) 13.24% c.) 22.12% d.) 18.85% e.) None of the options are correct

e.) None of the options are correct