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if you invested $100 and made a total dollar return of $10 over the course of the year, your year-end total cash would be

$110 = 100 + 10

if you buy 40 shares of BP stock at $35 per share, your total investment in BP is

$1400 = 40 x 35

if you receive a $2 dividend per share on your 100 shares, your total dividend income is

$200 = 2 x 100

the price of XYZ stock rises from $10 to $15. if you own 100 shares, your capital gain is

$500 = (15-10) x 100

the price of a stock drops from $50 to $40 per share. if you own 50 shares, your total capital loss is

$500 = (40-50) x 50

if you buy 100 shares of ABC stock at $5 per share, your total investment is

$500 = 100 x 5

the range of returns for a large stock portfolio, within 2 standard deviations, is ____.

-28.1 and +52.3%

if the risk premium of stock MNO is 10% and the standard deviation is 40%, what is the sharpe ratio?

.25 = .1/.4

if the risk premium of stock JKL is 5% while the standard deviation is 10%, then the sharpe ratio equals

.5 = .05/.1

the treasury bills used in the Ibbotson SBBI yearbook had maturities of:

1 month

You buy a stock for $50. Its price rises to $55, and it pays a $2 dividend. You do not sell the stock. Your capital gains yield is

10% = (55 - 50) / 50

if stock GHI has an initial price of $100. two years later the price is $132. what is GHI's geometric mean rate of return?

14.89% = (132/100)^(1/2) - 1

the 94.5% confidence interval for the historical standard error for the true us equity risk premium should be within _____ % to _____%.

3.4; 11

what is the approximate standard deviation of the returns on an average stock?

50%

in 2015, the us stock market represented about _________% of the world stock market capitalization.

57.7

the probability of a return being within one standard deviation of the mean in a normal distribution is approximately _______ percent.

68

what is the arithmetic average return for a stock that had annual returns of 8%, 2%, and 11% for the past 3 years?

7% = (8 + 2 + 11)/3

If the arithmetic average return is 10% and the variance of returns is 0.05, find the approximate geometric mean

7.5

From 1900 to 2010, the US ranked ____ when compared internationally in terms of highest equity risk premium.

7th

If the annual stock market returns for Berry Company were 19 percent, 13 percent, and -8 percent, what was the arithmetic mean for those 3 years?

8% = (.19 + .13 - .08) / 3

the long-run average risk premium for large-company common stocks for the period 1926 to 2014 was:

8.6%

the probability of an outcome being within two standard deviations of the mean in a normal distribution is approximately _______ percent.

95

a positive capital gain on a stock results from

an increase in price

Percentage returns are more convenient than dollar returns because they:

apply to any amount invested

the _____ mean is the best estimate of next years returns.

arithmetic

what are some important lessons from the 2008 financial crisis? a) investors should invest all of their funds in T-bills b) diversification is important c) the stock market is risky d) the risk premium going forward will probably be lower

b + c

which of the following are true? a) on average, T-bills outperform common stock b) common stocks frequently experience negative returns c) T-bills sometimes outperform common stocks

b + c

the total dollar return is the sum of dividends and

capital gains or losses

the average return on the stock market can be used to

compare stock returns with the returns on other securities

historically, there is a ______ relationship between risk and expected return in the financial markets.

direct

the _____ risk premium on common stocks represents the additional return from bearing risk.

equity

the average excess return on common stocks is called the _____ risk premium.

equity

the Ibbotson SBBI small stock portfolio includes the bottom _______ of NYSE listed stocks.

fifth

the _____ period rate of return is simply the rate of return over some arbitrary investment period.

holding

the arithmetic average rate of return measures the

return in an average year over a given period

the sharpe ratio measures

reward to risk

assumptions related to the _____ are critical for forecasting future us equity premiums.

risk aversion of future investors and the future risk environment

geometric averages are usually _____ arithmetic averages

smaller than

(T/F) a capital gain on a stock is counted as part of the total return whether or not the gain is realized from selling the stock.

true

the square of the standard deviation is equal to

variance

what will the dividend income be on 1000 shares of XYZ stock if XYZ distributes a $.20 per share dividend?

$200 = .2 x 1000

You bought one share of stock for $100 and received a $2 dividend. If the price of the stock rose to $103, then your total dollar return would be _____.

$5 = 103 - 100 + 2

If your total dollar return was $7 and your dividend was $2, then the price change on your stock must have been ____

$5 = 7-2

One year ago, Ernie purchased shares of RTF common stock for $100 a share. Today the stock paid a dividend of $1 per share. If the stock currently sells for $114 per share, what is Ernie's total return?

15% = (114 - 100 + 1) / 100

If stock ABC has a mean return of 10 percent with a standard deviation of 5 percent, then the probability of earning a return greater than 15% is about _______%.

16 = Prob (R>15%) = (1-.68)/2

a share of common stock currently sells for $100 and will pay a dividend of $2 at the end of the year. if the price is expected to increase to $113 at the end of one year, what is the stock's current dividend yield?

2% = 2/100

the probability of a return being more than two standard deviations below the mean in a normal distribution is approximately _____ percent.

2.5

If stock ABC has a mean return of 10 percent with a standard deviation of 5 percent, then the probability of earning a negative return is approximately ___ percent.

2.5 = .05/2

Bonds used in Ibbotson SBBI long-term U.S. government bond portfolio had maturities of ___ years.

20

long-term corporate bonds is a portfolio of high-quality corporate bonds with _____-year maturities.

20

what is the arithmetic average return for a mutual fund that reported a return of 5% every year for the last 3 years?

5% = (5% + 5% + 5%)/3

going back to 1802, the us historical risk premium is, on average, about ________ %.

5.4

if a stock has returns of 10% and 20% over 2 years, the geometric average rate of return can be calculated by

[(1.10)(1.20)]^.5 - 1

the excess rate of return: a) can occasionally be negative b) is generally positive over the long term c) can never be negative for more than a 1-year period

a + b

which of the following are needed to describe the distribution of stock returns? a) the standard deviation of returns b) the mean return c) the variety of returns d) the life span of the stock

a + b

the Ibbotson SBBI data show that over the long-term: a) T-bills, which have the lowest risk, generated the lowest return b) small-company stocks had the highest risk level c) long-term corporate bonds had the lowest risk d) large-company stocks generated the highest average return e) small-company stocks generated the highest average return

a + b + e

when dealing with the history of capital market returns, an average stock market return is useful because it: a) is the best estimate of any one years stock market return during the specified period b) guarantees the long-term future rate of return c) simplifies detailed market data d) accurately forecasts future short-run returns

a + c

a frequency distribution of stock returns displays: a) various ranges of returns on the horizontal axis b) the standard deviation of all data points c) the average of all data points d) the frequency of occurrence for each rate of return range

a + d

the rates of return in the Ibbotson SBBI yearbook are not adjusted for which of the following? a) taxes b) bond coupons c) dividends d) transaction costs

a + d

which of the following are true about the stock performance of other countries in 2008? a) Russia's stock prices fell by more than 50% b) china's stock prices actually went up by 5% c) india's stock prices only fell by 20% d) Iceland's stock prices fell by over 90%

a + d

which of the following positive financial events occurred in the us in 2008? a) inflation was only 5% b) T-bills had positive returns c) long-term bonds had positive returns d) corporate bonds rose 15%

b + c

some important characteristics of normal distribution is that it is: a) very bumpy b) symmetrical c) skewed to the right d) bell-shaped

b + d

the dividend yield for a one-year period is equal to the annual dividend amount divided by the

beginning stock price

the Ibbotson SBBI data presents returns from 1948 to the recent past for: a) high-yield bonds b) municipal bonds c) small-company stocks d) us treasury bills e) large-company stocks

c + d + e

the geometric rate of return takes _____ into account.

compounding

in the Ibbotson study, the large-company common stock portfolio is based on the _____.

standard & poor's composite index

the sharpe ratio is the stocks excess return (risk premium) divided by its ______.

standard deviation

using the Ibbotson SBBI yearbook, year-by-year real returns can be calculated by

subtracting the annual inflation rate from the annual historical rate of return

the geometric average rate of return is approximately equal to:

the arithmetic mean minus half the variance