Fin 355 ch 1

E. the rate of return on a riskless investment.

1. The risk-free rate is: A. another term for the dividend yield. B. defined as the increase in the value of a share of stock over time. C. the rate of return earned on an investment in a firm that you personally own. D. defined as the total of the capital gains yield plus the dividend yield. E. the rate of return on a riskless investment.

E. risk premium.

The additional return earned for accepting risk is called the: A. inflated return. B. capital gains yield. C. real return. D. riskless rate. E. risk premium.

C. risk-free rate.

The rate of return earned on a U.S. Treasury bill is frequently used as a proxy for the: A. risk premium. B. deflated rate of return. C. risk-free rate. D. expected rate of return. E. market rate of return.

A. a risky asset minus the risk-free rate.

The risk premium is defined as the rate of return on: A. a risky asset minus the risk-free rate. B. the overall market. C. a U.S. Treasury bill. D. a risky asset minus the inflation rate. E. a riskless investment.

A. volatility.

The standard deviation is a measure of: A. volatility. B. total return. C. capital gains. D. changes in dividend yields. E. changes in the capital gains rate.

B. Dollar weighted average Correct

Which measure of return is appropriate when the investment involves not only the initial investment? Select one: A. Arithmetic Average B. Dollar weighted average Correct C. Geometric Average D. Total dollar return

C. Arithmetic average Correct

Which measure of return is our best guess of a stock's return in a future year? Select one: A. Dollar weighted average B. Total dollar return C. Arithmetic average Correct D. Geometric average

C. U.S. Treasury Bills

Which of the following asset categories has an annual returns history most closely linked to historical annual rates of inflation? Select one: A. Corporate Bonds B. Large Company Stocks C. U.S. Treasury Bills Correct D. Small-Company Stocks

D. Small Stocks Correct

Which of the following investments has the highest historical average return? Select one: A. Long Term Government Bond B. Large Stocks C. Long Term Corporate Bonds D. Small Stocks Correct E. Treasury Bills

a. Small Stocks Correct

Which of the following investments has the highest historical volatility? Select one: a. Small Stocks Correct b. T Bills c. Long Term Govt Bonds d. Long Term Corporate Bonds e. Large Stocks

A. Is denominated in the same units as the original data Correct

Which of the following is true about standard deviation? Standard deviation Select one: A. Is denominated in the same units as the original data Correct B. Is the arithmetic mean of the squared deviation from the mean C. Is the square of the variance D. Can be a positive or negative number

D. small-company stocks

Which one of the following had the greatest volatility of returns for the period 1926-2012? A. large-company stocks B. U.S. Treasury bills C. long-term government bonds D. small-company stocks E. long-term corporate bonds

D. small-company stocks

Which one of the following had the highest average return for the period 1926-2012? A. large-company stocks B. U.S. Treasury bills C. long-term government bonds D. small-company stocks E. long-term corporate bonds

D. small-company stocks

Which one of the following had the highest risk premium for the period 1926-2012? A. U.S. Treasury bills B. long-term government bonds C. large-company stocks D. small-company stocks E. intermediate-term government bonds