FIN 300 Final Ch 12

What is the amount of the risk premium on a U.S. Treasury bill if the risk-free rate is 2.8 percent and the market rate of return is 8.35 percent?

0

Assume all stock prices fairly reflect all of the available information on those stocks. Which on of the following terms best defines the stock market under these conditions?

Efficient capital market

Which one of the following statements related to market efficiency tends to be supported by current evidence?

Markets tend to respond quickly to new information.

The historical record for the period 1926-2013 supports which one of the following statements?

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

The excess return is computed as the

return on a risky security minus the risk-free rate

One year ago, you purchased a stock at a price of $32.15. The stock pays quarterly dividends of $.20 per share. Today, the stock is selling for $33.09 per share. What is your capital gain on this investment?

$.94

Bayside Marina just announced it is decreasing its annual dividend from $1.64 per share to $1.50 per share effective immediately. If the dividend yield remains at its pre-announcement level, then you know the stock price:

Decreased proportionately with the dividend decrease

The average compound return earned per year over a multiyear period is called the _____ average return.

Geometric

Which one of the following categories of securities had the lowest average risk premium for the period 1926-2013?

US treasury bills

As long as the inflation rate is positive, the real rate of return on a security will be ____ the nominal rate of return.

less than

Assume the returns from an asset are normally distributed. The average annual return for the asset is 18.1 percent and the standard deviation of the returns is 32.5 percent. What is the approximate probability that your money will triple in value in a single year?

less than .5 percent

Individual investors who continually monitor the financial markets seeking mispriced securities:

make the market increasingly more efficient

individual investors who continually monitor the financial markets seeking misplaced securities

make the markets increasingly more efficient

Stacy purchased a stock last year and sold it today for $3 a share more than her purchase price. She received a total of $.75 in dividends. Which one of the following statements is correct in relation to this investment?

the capital gain yield is positive

Standard deviation is a measure of which of the following?

volatility