Chapter 12 connect finance
The rate of return on which type of security is normally used as the risk-free rate of return?
Treasury bills
Inside information has the least value when financial markets are:
strong form efficient.
Six months ago, you purchased 500 shares of stock in Szeto Worldwide at a price of $27.84 per share. The stock pays a quarterly dividend of $1.85 per share. Today, you sold all of your shares for $33.20 per share. What is the total amount of your dividend income on this investment?
$1,850
Over a 25-year period an asset had an arithmetic return of 13.1 percent and a geometric return of 12.6 percent. Using Blume's formula, what is your best estimate of the future annual returns over the next 10 years?
12.91%
A stock had annual returns of 5.5 percent, −12 percent, and 15.5 percent for the past three years, respectively. What is the standard deviation of returns for this stock?
13.92%
Suppose you bought a $1,000 face value bond with a coupon rate of 5.6 percent one year ago. The purchase price was $987.50. You sold the bond today for $994.20. If the inflation rate last year was 2.6 percent, what was your exact real rate of return on this investment?
3.65%
Over the past four years a stock had prices of $12.78, $13.34, $16.30, and $15.40, respectively. The stock pays an annual dividend of $.50 per share. What is the geometric average return on this stock?
9.98%
A stock had returns of 14 percent, 13 percent, −10 percent, and 7 percent for the past four years. Which one of the following best describes the probability that this stock will lose no more than 10 percent in any one year?
Greater than 84 percent but less than 97.5 percent
For the period 2009-2019, U.S. Treasury bills had an annual rate of return that was:
between 0 and 2.5 percent.
The average compound return earned per year over a multiyear period is called the _____ average return.
geometric
For the period 1926-2019, U.S. Treasury bills always:
provided a positive annual rate of return. Correct
You own 850 shares of Bennett Trading stock valued at $53.15 per share. What is the dividend yield if your total annual dividend income is $1,256?
2.78%
Which one of the following had the least volatile annual returns over the period of 1926-2019?
U.S. Treasury bills
Assume all stock prices fairly reflect all of the available information on those stocks. Which one of the following terms best defines the stock market under these conditions?
Efficient capital market
Which one of the following best defines the variance of an investment's annual returns over a number of years?
The average squared difference between the actual returns and the arithmetic average return
Assume the returns from an asset are normally distributed. The average annual return for the asset is 17.4 percent and the standard deviation of the returns is 27.5 percent. What is the approximate probability that your money will double in value in a single year?
Close to .5 percent
If the variability of the returns on large-company stocks were to decrease over the long-term, you would expect which one of the following as related to large-company stocks to occur as a result?
Decrease in the 68 percent probability range of returns
Which one of the following statements is a correct reflection of the U.S. financial markets for the period 1926-2019?
U.S. Treasury bills had an annual return in excess of 10 percent in three or more years.
An investment earned annual returns of 7 percent, −32 percent, 11.5 percent, and 21.4 percent during the past four years. If you wish to know the compound annual rate of growth that the investment experienced, you should determine the ________, which equals ________ percent.
geometric; −.38
You are aware that your neighbor trades stocks based on confidential information he overhears at his workplace. This information is not available to the general public. This neighbor often comments on the profits he earns on these trades. Given this, you would tend to argue that the financial markets are at best _____ form efficient
semistrong
