BFin Ch 10 LS
you buy a stock for $50. its price rises to $55, and it pays a $2 dividend in a year. you do not sell the stock. your dividend yield is:
%4. ($2/%50)
Investments from lowest historical risk premium to highest historical risk premium
1. U.S. Treasury Bills 2. long-term corporate bonds 3. large-company stocks 4. small-company stocks
if a stock's returns for years 1 to 4 were 3% 5% 8% and -2%, what is the standard deviation of those returns?
4.203%
if the arithmetic average return is %10 and the variance of returns is 0.05, find the approximate geometric mean
7.5% (0.10-1/2 * 0.05= 7.5%
The second lesson from studying capital market history states that the ____ the potential reward, the ____ the risk
Less, less; greater, greater
a positive capital gain on a stock results from ____
an increase in price
% returns are more convenient than $ returns because they:
apply to any amount invested, allow comparison against other investments
normal distribution is:
bell-shaped, symmetrical
____ were a bright spot for US investors during 2008
bonds
when a company declares a dividend, shareholders generally receive
cash
historically, there is a ____ relationship between risk and expected return in the financial markets
direct
the ____ rate of return is the difference between the rate of return on a risky asset and the risk-free rate of return
excess
in an efficient market, firms should expect to receive ____ value for securities they sell
fair
the return-risk relationship states that a riskier investment should demand a ____ return
higher
an efficient market is one in which any change in available information will be reflected in the company's stock price ____
immediately
an efficient market is one that fully reflects all available
information
the normal distribution is completely described by the ____ and ____
mean, variance or standard deviation
if you use an arithmetic average to project long-run wealth levels, your results will most likely be ____
optimistic
the standard deviation is the ____ of the variance
square root
two ways of calculating average returns are ____ & ____
the arithmetic average, the geometric average
studying market history can reward us by demonstrating that
there is a reward for bearing risk, the greater the potential reward is, the greater the risk
The efficient markets hypothesis contends that _____ capital markets such as the NYSE are efficient
well organized
ways to make money by investing in stocks:
dividends, capital gains