BADM 310: Final Exam (Chapter 12 Learnsmart)

stock price

A capital gain on a stock results from an increase in __________.

10 to 20

A projected IRR on a risky investment in the _____ percent range is not unusual.

- U.S. Treasury Bills - Long-term corporate bonds - Large-company stocks - Small-company stocks

Arrange the following investments in ascending order from lowest historical risk premium at the top to highest historical risk premium at the bottom.

16

Based on average historical returns shown in the text, small-company stocks increased in value by _____ percent in a typical year.

income

Dividends are the ______ component of the total return from investing in a stock.

37

During the financial crisis of 2008, the S&P 500 Index fell by _____ percent.

Blume's formula

If you are forecasting a few decades in the future (as you might do for retirement planning) you should calculate the expected return using:

capital gain of $6

If you buy a stock for $10 and later sell it for $16, you will have a ____.

- assets are priced at the present value of their future cash flows - all investments are zero NPV investments

In an efficient market: - It is easy to find stocks that are under- or over-valued. - assets are priced at the present value of their future cash flows - all investments are zero NPV investments

S&P 500 Index

In the Ibbotson study, the large-company common stock portfolio is based on the ________.

- symmetrical - bell-shaped

Some important characteristics of the normal distribution are that it is:

True

T/F: A capital gain on a share is counted as part of the total return whether or not the gain is realised from selling the share.

False

T/F: The smaller the variance or standard deviation is, the more spread out the returns will be.

inflation

The CPI is the most commonly used measure of _____.

-T-bills, which had the lowest risk, generated the lowest return - small-company stocks had the highest risk level - small-company stocks generated the highest average return

The Ibbotson-Sinquefield data show that over the long-term, _________.

capital

The __________ gains yield can be found by taking the difference between the ending stock price and the initial stock price and dividing it by the initial stock price.

Sharpe

The ____________ ratio is calculated as the risk premium of the asset divided by the standard deviation.

greater

The _____________ (greater/lower) the risk, the greater the required return.

beginning stock price

The dividend yield for a 1-year period is equal to the annual dividend amount divided by the ________.

handsomely rewarded

The second lesson from studying capital market history is that risk is ________.

percent squared; percent

Variance is measured in ___, while standard deviation is measured in ___.

- Dividends - Capital Gain

Which of the following are ways to make money by investing in stocks? (Select all that apply.)

future market prices are hard to predict based on publicly available information

Which of the following is a conclusion that can be drawn regarding market efficiency from capital market history?