FIN 3000 Concepts to Know

Which one of the following categories of securities has the most volatile annual returns over the period 1926-2019

- Long-term corp bonds - Large-company stocks - Intermediate term government bonds - US treasury bills - small company stocks

To convince investors to accept greater volatility, you must

- decrease the risk premium - increase the risk premium - decrease the real return - decrease the risk free rate - increase the risk free rate

Based on the period 1926-2019, the actual real return on large-company stocks has been around - 9% - 10% - 6% - 7% - 8%

9 percent

Which of the following yields on a stock can be negative? - Dividend yield - Capital gains yield - Capital gains yield and total return - Dividend yield, capital gains yield, and total return Dividend yield and total return

Capital gains yield and total return

Which one of the following correctly describes the dividend yield? - Next year's annual dividend divided by today's stock price - This year's annual dividend divided by today's stock price - This year's annual dividend divided by next year's stock price - Next year's annual dividend divided by this year's annual dividend - The increase in next year's dividend over this year's dividend by this year's dividend

Next year's dividend divided by today's stock price

Assume that last year T-bills returned 2.2 percent while your investment in large-company stocks earned an average of 9.1 percent. Which one of the following items refers to the difference between these two rates of return - Risk premium - Geometric average return - The arithmetic average return - Standard deviation - Varience

Risk premium

Which one of the following categories of securities has the highest average annual return for the period 1926-2019 - U.S. Treasury bills - Large-company stocks - Small-company stocks - Long-term corporates bonds - Long-term government bonds

Small-company stocks

Which one of the following earned the highest risk premium over the period 1926-2019 - Long-term corporate bonds - US treasury bills - Small-company stocks - Large company stocks - Long term gov bonds

Small-company stocks

The historical record for the period 1926-2019 supports which one of the following statements - When large-company stocks have a negative return, they will have a negative return for at least two consecutive years. - The return on U.S. Treasury bills exceeds the inflation rate by at least .5 percent each year. - There was only one year during the period when double-digit inflation occurred. - Small-company stocks have lost as much as 50 percent and gained as much as 100 percent in a single year. - The inflation rate was positive each year throughout the period.

Small-company stocks have lost as much as 50% and gained as much as 100% in a single year