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Exam 10: Risk and Return: Lessons From Market History

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Question 21

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If you examine the U.S.stock market risk premium by extending the 1926 to 2015 time period backwards in time to 1802 (given the available information) ,the risk premium

A) decreases to 5.2 percent.
B) increases to 7.6 percent.
C) decreases to 3.9 percent.
D) increases to 7.1 percent.
E) decreases to 6.3 percent.

F) B) and C)
G) C) and D)

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Question 22

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A stock had returns of 11 percent,26 percent,8 percent,and −38 percent annually for the past 4 years.What is the mean and variance of these returns?

A) 1.75%; .057319
B) 1.75%; .076425
C) 3.50%; .057319
D) 3.50%; .062833
E) 3.50%; .076425

F) C) and D)
G) A) and E)

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Question 23

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Given a set of returns,the wider the distribution of those returns,the

Jen invested $1 fifty years ago.Today,her investment is worth $18,329.46.What is the geometric average return on this investment?

You are comparing the returns of two portfolios for a 10-year period.Portfolio I has a lower dispersion of returns and a higher average rate of return than Portfolio II.Given this,what do you know with certainty?

Assume a $1 investment in a stock 23 years ago is now worth $28.82.What is the geometric average return for the period?

One year ago,Barkley's stock sold for $28 a share.During last year,Barkley's paid $1.23 per share in dividends and saw its stock price increase by 7 percent for the year.Today,the firm announced that it will pay $1.30 per share in dividends this year.What do you know with certainty about the performance of Barkley's stock for this year?

How is the Sharpe ratio defined as it applies to security returns?

Which one of these statements correctly reflects historical history for the period 1926-2015?

Kurt's Toy Co.has total annual returns for the past 5 years of -8.2 percent,11.7 percent,-6.4 percent,18.7 percent,and 6.8 percent.What is the 5-year holding period return?

In 2008,the S&P 500 index

For the period 1926 to 2015,small-company stocks had an average return of 16.5 percent,U.S.Treasury bills returned 3.5 percent,and inflation averaged 3.0 percent.What was the risk premium on small-company stocks during this period?

Assume inflation averaged 1.2 percent during a period in which U.S.Treasury bills earned 1.3 percent.What was the rate of return on large-company stocks if the risk premium on those stocks was 6.8 percent for the period?

For the period 1926 to 2015,the mean return on large-company stocks is

The return earned in a typical year over a multiyear period is called the ________ average return.

The histograms of the returns on large-company and small-company stocks for the period 1926 to 2015 show that

Suppose a portfolio had an arithmetic average return of 8 percent for a 4-year period.Which one of these statements must be true regarding this portfolio for the period?

A stock had annual returns of 9 percent,−16 percent,14 percent,and 2 percent over the past 4 years.What is the standard deviation of these returns?

The standard deviation for a set of stock returns can be calculated as the

One year ago,Ted purchased 300 shares of stock at $18.09 a share.Today,he received a total of $267 in dividends and sold his shares for a total of $5,250.What was his total rate of return?