Question 1

Small-company stocks, as the term is used in the textbook, are best defined as the:

Accepted Answer

A)  500 newest corporations in the U.S.
B)  firms whose stock trades OTC.
C)  smallest twenty percent of the firms listed on the NYSE.
D)  smallest twenty-five percent of the firms listed on NASDAQ.
E)  firms whose stock is listed on NASDAQ.F) A) and C)
G) A) and E)

Question 2

Efficient financial markets fluctuate continuously because:

Accepted Answer

A)  the markets are continually reacting to old information as that information is absorbed.
B)  the markets are continually reacting to new information.
C)  arbitrage trading is limited.
D)  current trading systems require human intervention.
E)  investments produce varying levels of net present values.F) All of the above
G) A) and C)

Question 3

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

Accepted Answer

A)  greater than
B)  equal to
C)  less than
D)  greater than or equal to
E)  unrelated toF) A) and C)
G) All of the above

Question 4

One year ago, you purchased a stock at a price of $47.50 a share. Today, you sold the stock and realized a total loss of 22.11 percent. Your capital gain was -$12.70 a share. What was your dividend yield?

Accepted Answer

A)  4.63 percent
B)  4.88 percent
C)  5.02 percent
D)  12.67 percent
E)  14.38 percentF) A) and C)
G) All of the above

Question 5

What is the amount of the excess return 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?

Accepted Answer

A)  0.00 percent
B)  2.80 percent
C)  5.55 percent
D)  8.35 percent
E)  11.15 percentF) B) and E)
G) B) and D)

Question 6

A stock had annual returns of 3.6 percent, -8.7 percent, 5.6 percent, and 11.1 percent over the past four years. Which one of the following best describes the probability that this stock will produce a return of 20 percent or more in a single year?

Accepted Answer

A)  less than 0.1 percent
B)  less than 0.5 percent but greater than 0.1 percent
C)  less than 1.0 percent but greater the 0.5 percent
D)  less than 2.5 percent but greater than 1.0 percent
E)  less than 5 percent but greater than 2.5 percentF) C) and D)
G) None of the above

Question 7

You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 3 percent, -10 percent, 24 percent, 22 percent, and 12 percent. Suppose the average inflation rate over this time period was 3.6 percent and the average T-bill rate was 4.8 percent. Based on this information, what was the average nominal risk premium?

Accepted Answer

A)  5.15 percent
B)  5.40 percent
C)  6.01 percent
D)  6.37 percent
E)  6.60 percentF) C) and D)
G) C) and E)

Question 8

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:

Accepted Answer

A)  was unaffected by the announcement.
B)  increased proportionately with the dividend decrease.
C)  decreased proportionately with the dividend decrease.
D)  decreased by $0.14 per share.
E)  increased by $0.14 per share.F) None of the above
G) All of the above

Question 9

Which two of the following are the most likely reasons why a stock price might not react at all on the day that new information related to the stock issuer is released?
I. insiders knew the information prior to the announcement
II. investors need time to digest the information prior to reacting
III. the information has no bearing on the value of the firm
IV. the information was anticipated

Accepted Answer

A)  I and II only
B)  I and III only
C)  II and III only
D)  II and IV only
E)  III and IV onlyF) B) and E)
G) B) and D)

Question 10

Today, you sold 200 shares of Indian River Produce stock. Your total return on these shares is 5.65 percent. You purchased the shares one year ago at a price of $31.10 a share. You have received a total of $100 in dividends over the course of the year. What is your capital gains yield on this investment?

Accepted Answer

A)  3.68 percent
B)  4.04 percent
C)  5.67 percent
D)  7.26 percent
E)  7.41 percentF) D) and E)
G) None of the above

Question 11

Define and explain the three forms of market efficiency.

Accepted Answer

The current stock price reflects the fol...

Question 12

The primary purpose of Blume's formula is to:

Accepted Answer

A)  compute an accurate historical rate of return.
B)  determine a stock's true current value.
C)  consider compounding when estimating a rate of return.
D)  determine the actual real rate of return.
E)  project future rates of return.F) A) and B)
G) D) and E)

Question 13

One year ago, you purchased 200 shares of a stock at a price of $54.18 a share. Today, you sold those shares for $40.25 a share. During the past year, you received total dividends of $164 while inflation averaged 4.2 percent. What is your approximate real rate of return on this investment?

Accepted Answer

A)  -24.20 percent
B)  -28.40 percent
C)  -20.00 percent
D)  20.00 percent
E)  24.20 percentF) C) and D)
G) None of the above

Question 14

Which one of the following time periods is associated with high rates of inflation?

Accepted Answer

A)  1929-1933
B)  1957-1961
C)  1978-1981
D)  1992-1996
E)  2001-2005F) A) and B)
G) A) and D)

Question 15

Which one of the following is defined by its mean and its standard deviation?

Accepted Answer

A)  arithmetic nominal return
B)  geometric real return
C)  normal distribution
D)  variance
E)  risk premiumF) A) and D)
G) C) and D)

Question 16

A stock had returns of 14 percent, 13 percent, -10 percent, and 7 percent for the past four years. Which one of the following best describes the probability that this stock will lose no more than 10 percent in any one year?

Accepted Answer

A)  greater than 0.5 but less than 1.0 percent
B)  greater than 1.0 percent but less than 2.5 percent
C)  greater than 2.5 percent but less than 16 percent
D)  greater than 84 percent but less than 97.5 percent
E)  greater than 95 percentF) C) and D)
G) A) and E)

Question 17

Based on past 26 years, Westerfield Industrial Supply's common stock has yielded an arithmetic average rate of return of 9.63 percent. The geometric average return for the same period was 8.57 percent. What is the estimated return on this stock for the next 4 years according to Blume's formula?

Accepted Answer

A)  8.70 percent
B)  8.92 percent
C)  9.13 percent
D)  9.38 percent
E)  9.50 percentF) A) and E)
G) A) and D)

Question 18

Assume that you invest in a portfolio of large-company stocks. Further assume that the portfolio will earn a rate of return similar to the average return on large-company stocks for the period 1926-2007. What rate of return should you expect to earn?

Accepted Answer

A)  less than 10 percent
B)  between 10 and 12.5 percent
C)  between 12.5 and 15 percent
D)  between 15 and 17.5 percent
E)  more than 17.5 percentF) B) and E)
G) B) and D)

Question 19

Last year, you purchased 500 shares of Analog Devices, Inc. stock for $11.16 a share. You have received a total of $120 in dividends and $7,190 from selling the shares. What is your capital gains yield on this stock?

Accepted Answer

A)  26.70 percent
B)  26.73 percent
C)  28.85 percent
D)  29.13 percent
E)  31.02 percentF) B) and E)
G) A) and E)

Question 20

Over the past fifteen years, the common stock of The Flower Shoppe, Inc. has produced an arithmetic average return of 12.2 percent and a geometric average return of 11.5 percent. What is the projected return on this stock for the next five years according to Blume's formula?

Accepted Answer

A)  11.70 percent
B)  11.89 percent
C)  12.00 percent
D)  12.03 percent
E)  12.12 percentF) A) and B)
G) A) and C)

Exam 12: Some Lessons From Capital Market History

One year ago, you purchased a stock at a price of $47.50 a share. Today, you sold the stock and realized a total loss of 22.11 percent. Your capital gain was -$12.70 a share. What was your dividend yield?

Correct Answer
verified

Last year, you purchased 500 shares of Analog Devices, Inc. stock for $11.16 a share. You have received a total of $120 in dividends and $7,190 from selling the shares. What is your capital gains yield on this stock?

Correct Answer
verified

Small-company stocks, as the term is used in the textbook, are best defined as the:

Correct Answer
verified

Which one of the following time periods is associated with high rates of inflation?

Correct Answer
verified

Assume that you invest in a portfolio of large-company stocks. Further assume that the portfolio will earn a rate of return similar to the average return on large-company stocks for the period 1926-2007. What rate of return should you expect to earn?

Correct Answer
verified

Based on past 26 years, Westerfield Industrial Supply's common stock has yielded an arithmetic average rate of return of 9.63 percent. The geometric average return for the same period was 8.57 percent. What is the estimated return on this stock for the next 4 years according to Blume's formula?

Correct Answer
verified

One year ago, you purchased 200 shares of a stock at a price of $54.18 a share. Today, you sold those shares for $40.25 a share. During the past year, you received total dividends of $164 while inflation averaged 4.2 percent. What is your approximate real rate of return on this investment?

Correct Answer
verified

What is the amount of the excess return 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?

Correct Answer
verified

The primary purpose of Blume's formula is to:

Correct Answer
verified

Correct Answer
verified

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:

Correct Answer
verified

Define and explain the three forms of market efficiency.

Correct Answer
verified
The current stock price reflects the fol...
View Answer

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

A stock had annual returns of 3.6 percent, -8.7 percent, 5.6 percent, and 11.1 percent over the past four years. Which one of the following best describes the probability that this stock will produce a return of 20 percent or more in a single year?

Correct Answer
verified

A stock had returns of 14 percent, 13 percent, -10 percent, and 7 percent for the past four years. Which one of the following best describes the probability that this stock will lose no more than 10 percent in any one year?

Correct Answer
verified

Which one of the following is defined by its mean and its standard deviation?

Correct Answer
verified

Over the past fifteen years, the common stock of The Flower Shoppe, Inc. has produced an arithmetic average return of 12.2 percent and a geometric average return of 11.5 percent. What is the projected return on this stock for the next five years according to Blume's formula?

Correct Answer
verified

Efficient financial markets fluctuate continuously because:

Correct Answer
verified

Exam 12: Some Lessons From Capital Market History

One year ago, you purchased a stock at a price of $47.50 a share. Today, you sold the stock and realized a total loss of 22.11 percent. Your capital gain was -$12.70 a share. What was your dividend yield?

Correct AnswerverifiedShow Answer

Last year, you purchased 500 shares of Analog Devices, Inc. stock for $11.16 a share. You have received a total of $120 in dividends and $7,190 from selling the shares. What is your capital gains yield on this stock?

Correct AnswerverifiedShow Answer

Small-company stocks, as the term is used in the textbook, are best defined as the:

Correct AnswerverifiedShow Answer

Which one of the following time periods is associated with high rates of inflation?

Correct AnswerverifiedShow Answer

Assume that you invest in a portfolio of large-company stocks. Further assume that the portfolio will earn a rate of return similar to the average return on large-company stocks for the period 1926-2007. What rate of return should you expect to earn?

Correct AnswerverifiedShow Answer

Based on past 26 years, Westerfield Industrial Supply's common stock has yielded an arithmetic average rate of return of 9.63 percent. The geometric average return for the same period was 8.57 percent. What is the estimated return on this stock for the next 4 years according to Blume's formula?

Correct AnswerverifiedShow Answer

One year ago, you purchased 200 shares of a stock at a price of $54.18 a share. Today, you sold those shares for $40.25 a share. During the past year, you received total dividends of $164 while inflation averaged 4.2 percent. What is your approximate real rate of return on this investment?

Correct AnswerverifiedShow Answer

What is the amount of the excess return 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?

Correct AnswerverifiedShow Answer

The primary purpose of Blume's formula is to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

Define and explain the three forms of market efficiency.

Correct AnswerverifiedThe current stock price reflects the fol...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A stock had annual returns of 3.6 percent, -8.7 percent, 5.6 percent, and 11.1 percent over the past four years. Which one of the following best describes the probability that this stock will produce a return of 20 percent or more in a single year?

Correct AnswerverifiedShow Answer

A stock had returns of 14 percent, 13 percent, -10 percent, and 7 percent for the past four years. Which one of the following best describes the probability that this stock will lose no more than 10 percent in any one year?

Correct AnswerverifiedShow Answer

Which one of the following is defined by its mean and its standard deviation?

Correct AnswerverifiedShow Answer

Over the past fifteen years, the common stock of The Flower Shoppe, Inc. has produced an arithmetic average return of 12.2 percent and a geometric average return of 11.5 percent. What is the projected return on this stock for the next five years according to Blume's formula?

Correct AnswerverifiedShow Answer

Efficient financial markets fluctuate continuously because:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The current stock price reflects the fol...
View Answer

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Correct Answer
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