46) You bought 600 shares of stock at $24.20 each. At the end of the year, you received a total of
$720 in dividends, and your stock was worth a total of $15,678. What was your total dollar
capital gain and total dollar return?
A) $1,878; $2,598
B) $1,878; $1,158
C) $1,158; $1,878
D) $1,158; $2,598
E) $2,598; $1,878
47) BCD shares are currently selling for $27.38 each. You bought 200 shares one year ago at
$26.59 and received dividend payments of $1.27 per share. What was your percentage capital
gain for the year?
A) 2.97 percent
B) 3.21 percent
C) 7.75 percent
D) −2.89 percent
E) 7.52 percent
48) One year ago, you purchased 300 shares of IXC stock at a price of $22.05 per share, received
$460 in dividends over the year, and today sold all your shares for $29.32 per share. What was
your dividend yield?
A) 5.23 percent
B) 5.87 percent
C) 6.95 percent
D) 1.92 percent
E) 2.48 percent
49) You purchased 300 shares of stock at a price of $37.23 per share. Over the last year, you
have received total dividend income of $351. What is the capital gains yield if your total return is
11.47 percent?
A) 8.33 percent
B) 7.26 percent
C) 9.39 percent
D) 9.50 percent
E) 7.67 percent
50) Winslow, Inc., stock is currently selling for $59.48 a share. The stock has an expected
growth rate of 4.22 percent and an expected total return for the next year of 9.87 percent. How
much dividend income should you expect to receive next year if you purchase 800 shares of this
stock today?
A) $2,309.20
B) $2,008.04
C) $2,688.50
D) $2,380.15
E) $2,001.10
51) A stock had annual returns of 7.63 percent, 9.28 percent, −3.11 percent, and 15.09 percent
for the past four years, respectively. What is the real arithmetic average rate of return for this
period if inflation averaged 2.3 percent?
A) 4.15 percent
B) 5.24 percent
C) 4.81 percent
D) 5.02 percent
E) 5.36 percent
52) Three years ago, you purchased a stock at a price of $33.48. The stock paid annual dividends
of $.60 per share. Today, the stock is worth $35.20 per share. What is your holding period
return?
A) 10.03 percent
B) 6.93 percent
C) 10.51 percent
D) 5.14 percent
E) 6.59 percent
53) Two years ago, you purchased 100 shares of stock in ABC at a price of $43.26 a share. The
stock pays an annual dividend of $.10 a share. Today, you sold all your shares for $46.71 per
share. What is your holding period return?
A) 8.24 percent
B) 7.81 percent
C) 7.97 percent
D) 8.44 percent
E) 8.90 percent
54) Soo Lee owns a stock that has had annual returns of 11.6 percent, 9.3 percent, −22.8 percent,
and 34.6 percent over the last four-year period. What is his arithmetic mean return on this
investment?
A) 7.94 percent
B) 19.58 percent
C) 14.62 percent
D) 11.47 percent
E) 8.18 percent
55) Assume that over the last several decades, the total annual returns on large-company
common stocks averaged 12.1 percent, small-company stocks averaged 16.5 percent, long-term
government bonds averaged 6 percent, and U.S. T-bills averaged 3.4 percent. What was the
average excess return earned by long-term government bonds, and small-company stocks
respectively?
A) 1.8 percent; 13.3 percent
B) 2.6 percent; 13.1 percent
C) 2.6 percent; 4.4 percent
D) 1.9 percent; 5.1 percent
E) 4.4 percent; 2.6 percent
56) You invested in long-term corporate bonds and earned 6.8 percent. During that same time
period, large-company stocks returned 12.6 percent, long-term government bonds returned 6.4
percent, U.S. Treasury bills returned 4.2 percent, and inflation averaged 3.8 percent. What excess
return did you earn?
A) 2.6 percent
B) 2.3 percent
C) 1.3 percent
D) .4 percent
E) 3.0 percent
57) You have a sampling of returns for the Malta Stock Fund. The returns are 7.25 percent, 5.63
percent, 12.56 percent, and 1.08 percent. What is the mean and variance of this sampling?
A) 6.57 percent; .00287
B) 6.63 percent; .00225
C) 6.65 percent; .00215
D) 6.63 percent; .00287
E) 6.63 percent; .00215
58) A stock had returns of 9 percent, −6 percent, 4 percent, and 16 percent over the past four
years. What is the standard deviation of these returns?
A) 8.56 percent
B) 6.67 percent
C) 7.14 percent
D) 9.25 percent
E) 7.98 percent
59) A stock has an expected rate of return of 8.3 percent and a standard deviation of 6.4 percent.
Which one of the following best describes the probability that this stock will lose more than 4.50
percent in any one given year?
A) Less than 2.5 percent
B) Less than 1.0 percent
C) Less than 1.5 percent
D) Less than .5 percent
E) Less than 5 percent
60) A stock had annual returns of 3 percent, 18 percent, and −24 percent over a three-year
period. Based on this information, what is the 68 percent probability range for any one given
year?
A) −40.53 to 38.53 percent
B) −20.28 to 22.28 percent
C) −20.28 to 20.28 percent
D) −22.28 to 20.28 percent
E) −43.56 to 41.56 percent
61) A stock had annual returns of 8 percent, 14 percent, and 2 percent for the past three years.
Based on these returns, what is the probability that this stock will return more than 26 percent in
any one given year?
A) 2.5 percent
B) 1.0 percent
C) .5 percent
D) 5.0 percent
E) 16.0 percent
62) A stock had returns of 16 percent, 4 percent, −22 percent, 15 percent, and −2 percent for the
past five years. What is the variance of these returns?
A) .01997
B) .02037
C) .02402
D) .01869
E) .02340
63) A stock had returns of 8 percent, 39 percent, 11 percent, and −24 percent for the past four
years. Which one of the following best describes the probability that this stock will not lose more
than 43 percent in any one given year?
A) 92.5 percent
B) 95.0 percent
C) 97.5 percent
D) 84.0 percent
E) 99.5 percent
64) Over the past four years, a stock produced returns of 14 percent, 22 percent, 6 percent, and
−19 percent. What is the approximate probability that an investor in this stock will not lose more
than 30 percent nor earn more than 41 percent in any one given year?
A) 84 percent
B) 95 percent
C) 68 percent
D) 5 percent
E) 34 percent
65) The returns on a portfolio over the last five years were −5.2 percent, 21.6 percent, 4.5
percent, 11.7 percent, and 5.9 percent. What is the standard deviation of these returns?
A) 8.82 percent
B) 9.21 percent
C) 9.86 percent
D) 9.08 percent
E) 9.73 percent
1)}.5
66) Suppose you own a risky asset with an expected return of 12.6 percent and a standard
deviation of 18.2 percent. If the returns are normally distributed, the most accurate probability
that the stock will return more than 50 percent in any one given year is best described as less
than:
A) .025 percent.
B) .05 percent.
C) 2.5 percent.
D) .01 percent.
E) 1.25 percent.
67) The return pattern on your favorite stock has been 5.39 percent, 8.26 percent, −12.04 percent,
and 14.27 percent over the last four years. What are the average arithmetic and geometric rates of
return?
A) 3.45 percent; 3.21 percent
B) 3.97 percent; 3.48 percent
C) 3.88 percent; 3.64 percent
D) 3.92 percent; 3.56 percent
E) 3.51 percent; 3.26 percent
68) What are the arithmetic and geometric average returns (Answer in that order.) for a stock
with annual returns of 4 percent, 9 percent, −6 percent, and 18 percent?
A) 5.89 percent; 6.25 percent
B) 6.25 percent; 5.89 percent
C) 6.25 percent; 8.33 percent
D) 8.33 percent; 5.89 percent
E) 8.33 percent; 8.33 percent
69) What are the arithmetic and geometric (Answer in that order.) average returns for a stock
with annual returns of 9.4 percent, 8.2 percent, −7.3 percent, 4.1 percent, and 9.5 percent?
A) 5.61 percent; 4.58 percent
B) 5.61 percent; 4.78 percent
C) 4.78 percent; 4.58 percent
D) 4.58 percent; 5.61 percent
E) 4.58 percent; 4.78 percent
70) A stock had returns of 12 percent, 6 percent, 13 percent, −11 percent, and −2 percent over
the past five years. What is the geometric average return for this time period?
A) 3.60 percent
B) 3.19 percent
C) 3.29 percent
D) 3.62 percent
E) 4.40 percent
71) A stock was priced at $23.08, $24.15, $23.99, and $24.26 at end of Years 1 to 4,
respectively. The annual dividend is constant at $.20 a share. What is the geometric average
return on this stock?
A) 3.27 percent
B) 2.52 percent
C) 2.56 percent
D) 2.48 percent
E) 2.54 percent
72) Assume a stock had an historical equity risk premium of 5.49 percent and a standard
deviation of 11.46 percent over the past two decades. What is the 95.4 percent range for the
equity risk premium?
A) −.18 percent to 9.26 percent
B) −.57 percent to 15.09 percent
C) .41 percent to 20.03 percent
D) −.36 percent to 10.62 percent
E) 1.08 percent to 22.49 percent
73) Assume you are comparing two stocks that are identical in every way except that one stock
pays dividends and the other does not. How would you expect this difference to affect the annual
performance of the dividend-paying stock as compared to the non-dividend-paying stock?
74) What does the historical record reveal about the relationship between the returns on U.S.
Treasury bills and the rate of inflation as measured by the consumer price index? Is this
relationship what investors would tend to expect? Why or why not?
75) Based on historical market performance, what can we conclude about the relationship
between return and risk?
76) What are the lessons learned from capital market history? What evidence is there to suggest
these lessons are correct?
77) Suppose you have $30,000 invested in the stock market and your banker comes to you and
tries to get you to move that money into the bank’s certificates of deposit (CDs). He explains that
the CDs are 100 percent government insured and that you are taking unnecessary risks by being
in the stock market. How would you respond?