Finance Chapter 10
The Ibbotson-Sinquefield data shows that:
*long-term corporate bonds had less risk or variability than stocks *U.S. T-bills had the lowest risk or variability
More volatility in returns produces ______ difference between the arithmetic and geometric averages.
a larger
The two potential ways to make money as a stockholder are through _______ and capital appreciation.
dividends
Two ways of calculating average returns are _______ and _______.
geometric arithmetic
An unrealized gain is treated the same as a realized gain when computing the total
return
In the Ibbotson-Sinquefield studies, U. S. Treasury bill data is based on T-bills with a maturity of _______ month(s).
1
If you receive a $2 dividend per share on your 100 shares, your total dividend income is ____.
2 x 100
In an efficient market ______ investments have a _____ NPV.
all zero
Percentage returns are more convenient than dollar returns because they:
allow comparison against other investments apply to any amount invested
Which of the following are ways to make money by investing in stocks?
Dividends Capital gains
Dividends are the ______ component of the total return from investing in a stock.
income
A positive capital gain on a stock results from ___.
increase in price
The Ibbotson SBBI data show that over the long-term, ___.
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 arithmetic average rate of return measures the ____.
the return in an average year over a given period
If the arithmetic average return is 10% and the variance of returns is 0.05, find the approximate geometric mean.
0.10 -1/2 * 0.05 = 7.5%7.5%
An efficient market is one in which any change in available information will be reflected in the company's stock price ___.
immediately
If a study of past stock prices and volume to find mis-priced securities will not lead to gains in the market, then the market must be at least _____ efficient.
weak form