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Student: ___________________________________________________________________________
1. The total dollar return on an equity investment is defined as the:

A. increase in value of a share of stock over a period of time.
B. income received divided by the initial value of the security.
C. capital gain or loss plus any dividend income.
D. realized capital gain or loss.
E. dividend income received.
2. The annual dividend at time t + 1 divided by the stock price at time t is called the:
A. annualized rate of return.
B. capital gain.
C. total annual rate of return.
D. total dollar return.
E. dividend yield.
3. The capital gains yield is equal to:
A. (Pt Pt + 1 + Dt + 1) / Pt + 1.
B. (Pt + 1 - Pt + Dt) / Pt.
C. Dt + 1 / Pt.
D. (Pt + 1 Pt) / Pt.
E. (Pt + 1 Pt) / Pt + 1.
4. 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 rate of inflation.
E. a riskless investment.
5. The standard deviation is a measure of:
A. total return.
B. dividend income.
C. capital gains and losses.
D. a frequency distribution.
E. volatility.
6. The variance measures the:
A. total difference between the actual returns and the average return.
B. average squared difference between the actual returns and the average return.
C. total difference between the average squared returns and the risk-free return.
D. average squared difference between the actual returns and the risk-free return.
E. average difference between the actual squared returns and the risk-free return.
1
7. The frequency distribution, which is completely defined by its average and standard deviation, is
referred to as a(n):
A. normal distribution.
B. variance distribution.
C. expected rate of return.
D. average geometric return.
E. average arithmetic return.
8. The rate of return earned on a U.S. Treasury bill is referred to as the:
A. risk premium.
B. deflated rate of return.
C. risk-free rate.
D. expected rate of return.
E. market rate of return.
9. The arithmetic average return is the:
A. summation of the returns for a number of years divided by the number of years minus one.
B. compound total return for a period of years divided by the number of years in the period.
C. average compound return earned per year over a multiyear period.
D. average squared return earned in a single year.
E. return earned in an average year over a multiyear period.
10. The geometric average return is the:
A. summation of the returns for a number of years divided by the nth root where n equals the number of
years.
11. The value which is equal to the ending price of a security minus the beginning price is called the:
A. dividend yield.
B. capital gain or loss.
C. arithmetic dollar return.
D. geometric dollar return.
E. total dollar return.
12. The reward for bearing risk is called the:
A. risk premium.
B. average return.
C. total return.
D. geometric return.
E. real return.
13. The risk-free rate which is paid as compensation for waiting is referred to as the:
A. real rate of return.
B. average real return.
C. financial reward.
D. time value of money.
2
14. The fact that higher returns are associated with higher standard deviations is known as the:
A. real return factor.
B. geometric relationship.
C. risk-return tradeoff.
D. market capitalization.
E. market variance.
15. The square root of the variance is called the:
A. geometric return.
B. standard deviation.
C. normal distribution.
D. frequency distribution.
E. dispersion.
16. Another name for a normal distribution is the:
A. risk-return trade-off.
B. bell curve.
C. geometric dispersion.
D. average tendency.
E. time value continuum.
17. Jeff purchased a stock for $21 and later sold it for $27. He also received a dividend of $1.40. The total
percentage return on his investment is computed as:
A. $27 - $21.
B. $27 - $21 + $1.40.
C. ($27 - $21) / $27.
D. ($27 - $21 + $1.40) / $21.
E. ($27 - $21 + $1.40) / $27.
18. The dividend yield on a stock will be _____ and the capital gains yield will be _____.
A. positive; either positive or zero
B. positive; positive
C. positive; negative, positive, or zero
D. positive or zero; positive or zero
E. positive or zero; negative, positive, or zero
19. Capital gains are included in the return on an investment:
A. on an annual basis.
B. whenever the investment is sold and the capital gain is realized.
C. whenever dividends are paid.
D. whenever they occur, whether or not the investment is sold.
E. only if the investment incurs a loss in value or is sold.
20. If you multiply the number of shares of outstanding stock for a firm by the price per share, you are
computing the firm's:
A. equity ratio.
B. total book value.
C. market share.
E. time value.
3
21. Which one of the following had the narrowest bell curve for the period 1926-2005?
A. large-company stocks
B. long-term corporate bonds
C. long-term government bonds
D. small-company stocks
E. U. S. Treasury bills
22. Which one of the following had the greatest volatility for the period 1926-2005?
B. U.S. Treasury bills
E. long-term corporate bonds
23. Which one of the following had the lowest standard deviation of returns for the period 1926-2005?
D. intermediate-term government bonds
24. Which one of the following had the highest average return for the period 1926-2005?
25. Which one of the following has historically produced a return which is closest to the inflation rate?
D. U.S. Treasury bills
E. intermediate-term government bonds
26. Inflation, as measured by the Consumer Price Index, was highest during the period:
A. 1935-1938.
B. 1947-1950.
C. 1978-1981.
D. 1986-1989.
E. 1996-1999.
27. Large-company stocks produced the highest rates of return during the period:
A. 1946-1949.
B. 1966-1969.
C. 1984-1987.
D. 1990-1993.
E. 1995-1998.
4
28. Which category(ies) of investments had an annual rate of return that exceeded 100 percent for at least
one year during the period 1926-2005?
A. only large-company stocks
B. both large-company and small-company stocks
C. only small-company stocks
D. corporate bonds, large-company stocks, and small-company stocks
E. No category earned an annual return in excess of 100 percent.
29. For the period 1801-2001, gold:
A. outperformed stocks, bonds, and inflation.
B. outperformed inflation and U.S. Treasury bills.
C. outperformed bonds and underperformed stocks.
D. outperformed U.S. Treasury bills and underperformed bonds.
E. underperformed stocks, bonds, and U.S. Treasury bills.
30. The greatest one-day percentage decline in the Dow-Jones Industrial Average occurred on:
A. October 19, 1987.
B. October 28, 1929.
C. October 18, 1937.
D. December 12, 1914.
E. December 18, 1899.
31. Which one of the following had the highest risk premium for the period 1926-2005?
A. U.S. Treasury bills
B. long-term government bonds
C. large-company stocks
32. Historically, the higher the risk premium, the ______ the average return, and the _____ the standard
deviation of the returns.
A. higher; higher
B. higher; lower
C. lower; higher
D. lower; lower
E. There is no relationship between the risk premium and the average return.
33. The 95 percent probability range of a normal distribution is defined as the mean plus or minus _____
standard deviation(s).
A. one
B. two
C. three
D. four
E. five
34. The mean plus or minus one standard deviation defines the _____ percent probability range of a normal
distribution.
A. 50
B. 68
C. 82
D. 90
E. 95
5
35. The mean return on large-company stocks for a ten-year period is equal to:
A. the arithmetic average return for the period.
B. the geometric average return for the period.
C. the total return for the period divided by N - 1.
D. zero.
E. one.
36. If you want to increase the potential annual return on your investments, you will need to:
A. increase your investment in bonds and lower your investment in stocks.
B. increase your investment in U.S. Treasury bills and lower your investment in corporate bonds.
C. increase your portfolio's level of risk.
D. reduce the expected variability of your returns.
E. reduce the standard deviation of your returns.
37. Which one of the following statements is correct?
A. U.S. Treasury bills have a risk premium equal to one percent.
B. Large-company stocks have historically been more risky than small-company stocks.
C. The mean is a measure of volatility.
D. A risky asset will always earn a greater annual rate of return than a riskless asset.
E. There is a direct relationship between risk and return.
38. The wider the distribution of an investment's returns over time, the _____ the expected rate of return and
the ______ the standard deviation of returns.
A. higher; higher
B. higher; lower
C. lower; higher
D. lower; lower
E. The distribution of returns does not affect the expected rate of return.
39. Which one of the following represents the best method of measuring the return on an investment?
A. nominal dollar return
B. real dollar return
C. absolute dollar return
D. percentage return
E. variance return
40. A stock has varying annual rates of return over a 10-year period and a positive geometric average return
for the period. Given this, you know the arithmetic average return will be:
A. positive but less than the geometric average return.
B. less than the geometric return and could be negative, zero, or positive.
C. equal to the geometric average return.
D. either equal to or greater than the geometric average return.
E. greater than the geometric average return.
41. The geometric return on an asset is approximately equal to the arithmetic return:
A. plus one-half the standard deviation.
B. plus one-half the variance.
C. minus one-half the standard deviation.
D. minus one-half the variance.
E. times one-half.
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42. The purpose of Blume's formula is to:
A. predict future rates of return.
B. convert an arithmetic rate of return into a geometric rate of return.
C. convert a geometric average rate of return into an arithmetic average rate of return.
D. measure past performance in a consistent manner.
E. compute the historical mean return over a multi-year period of time.
43. A stock is quoted at 26.32, up .20. The current stock price is _____ and the prior day's trading price was
_____.
A. $26.12; $26.32
B. $26.52; $26.32
C. $26.32; $26.12
D. $26.32; $26.32
E. $26.32; $26.52
44. The common stock of Acadia, Inc., sold for $32.90 at the beginning of the year and $33.12 at the end of
the year. During the year, the stock paid $1.10 in dividends. What was the dividend yield for the year?
A. 3.30 percent
B. 3.32 percent
C. 3.34 percent
D. 3.36 percent
E. 3.38 percent
45. You purchased a stock for $42.60 a share and sold it one year later for $44.30 a share. You received a
total of $2.10 in dividends. What was your dividend yield on this investment?
A. 4.74 percent
B. 4.77 percent
C. 4.84 percent
D. 4.89 percent
E. 4.93 percent
46. You purchased 200 shares of a stock for $28.33 a share and sold the shares one year later for $27.16 a
share. Over the year, you received a total of $.90 in dividends per share. What was your capital gains
yield on this investment?
A. -4.31 percent
B. -4.27 percent
C. -4.13 percent
D. -0.99 percent
E. -0.95 percent
47. Today, you sold 500 shares of Delta More, Inc., for $62.80 a share. You bought the shares one year ago
at a price of $58.24 a share. Over the year, you received a total of $600 in dividends. What was your
capital gains yield on this investment?
A. 7.26 percent
B. 7.83 percent
C. 8.43 percent
D. 9.17 percent
E. 9.89 percent
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48. One year ago, you purchased 300 shares of Sith Brothers, Inc., at $51.64 a share. The stock paid a total
of $660 in dividends during the year. Today, you sold your shares for $52.08 share. What is your total
return on this investment?
A. 5.05 percent
B. 5.11 percent
C. 5.19 percent
D. 8.45 percent
E. 8.52 percent
49. You purchase a stock at the beginning of the year for $76.20 a share. Your total return for the year was
12.6 percent and the dividend yield was 3.2 percent. What was the price of the stock at the end of the
year?
A. $69.65
B. $74.07
C. $83.36
D. $85.80
E. $89.22
50. A stock sold for $38.20 at the beginning of the year. The end of year stock price was $40.11. What was
the amount of the annual dividend if the total return for the year was 9.712 percent?
A. $1.50
B. $1.54
C. $1.60
D. $1.76
E. $1.80
51. You purchased 100 shares of stock at a price of $71.05 and received a dividend of $1.34 per share. You
sold the stock for $72.36. What was your total dollar return?
A. $131
B. $185
C. $230
D. $265
E. $300
52. You own a stock that dropped in price from $54.90 to $46.08. The dividend yield is 1.2 percent. What is
your total return?
A. -13.73 percent
B. -14.87 percent
C. -16.07 percent
D. -17.94 percent
E. -19.14 percent
53. You plan to buy a stock and hold it for one year. You expect the stock price to be $54 a share at the end
of the year and you expect to receive an annual dividend of $2.20 a share. How much are you willing to
pay per share today if you desire a 12.5 percent rate of return on this investment?
A. $48.17
B. $49.96
C. $50.63
D. $50.87
E. $51.24
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54. An asset has annual returns of 11, 17, 3, -21, and 18 percent, respectively, for the last five years. What is
the variance of these returns?
A. .02568
B. .04212
C. .04141
D. .08288
E. .10272
55. For the past four years, ABC stock had annual returns of 5, 11, 7, and 19 percent, respectively. What is
the variance of these returns?
A. .003833
B. .005216
C. .007487
D. .009416
E. .011500
56. An asset had returns of 11, -8, 12, 9, and 7 percent, respectively, over the past five years. What was the
variance of the returns for this time period?
A. .00428
B. .00509
C. .00667
D. .00781
E. .00824
57. An asset has annual returns of 16, 10, 3, -18, and 21 percent, respectively, for the last five years. What is
the standard deviation of these returns?
A. 13.60 percent
B. 14.14 percent
C. 14.68 percent
D. 15.03 percent
E. 15.21 percent
58. Over the last four years, a stock produced returns of 14, 9, -7, and 12 percent, respectively. What is the
standard deviation of these returns?
A. 8.18 percent
B. 9.56 percent
C. 11.23 percent
D. 16.55 percent
E. 16.82 percent
59. A stock had returns of 9, -4, 7, and 6 percent, respectively, over the past four years. What was the
standard deviation of the returns for this time period?
A. 5.80 percent
B. 6.82 percent
C. 7.15 percent
D. 8.98 percent
E. 10.05 percent
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60. An asset has an arithmetic average return of 12 percent, a geometric average return of 9.6 percent, and a
standard deviation of 22 percent. What range of returns would you expect to see 95 percent of the time?
A. -54.0 to +78.0 percent
B. -34.4 to +53.6 percent
C. -32.0 to +56.0 percent
D. -12.4 to +31.6 percent
E. -10.0 to +34.0 percent
61. A stock has an average return of 12.8 percent and a standard deviation of 27.2 percent. What range of
returns would you expect to see approximately two-thirds of the time?
62. An asset has a return of 14.6 percent and a variance of .080656. What range of returns would you expect
to see approximately two-thirds of the time?
D. -6.53 to +22.67 percent
63. Stephen owns a stock which has an arithmetic average return of 9.2 percent, and a standard deviation of
11.4 percent. There is only a 2.5 percent chance that the stock will produce a return greater than ______
percent in any one year.
A. 20.6 percent
B. 22.8 percent
C. 32.0 percent
D. 43.4 percent
E. 54.8 percent
64. You own a stock with an average historical risk premium of 6.8 percent. The risk-free rate next year is
expected to be 4.6 percent. What rate of return should you expect on your stock for next year?
A. 2.10 percent
B. 2.20 percent
C. 11.11 percent
D. 11.40 percent
E. 11.71 percent
65. A stock has a return of 14.7 percent, and the risk-free rate is 5.2 percent. What is the risk premium for
this stock?
A. 9.03 percent
B. 9.27 percent
C. 9.50 percent
D. 9.66 percent
E. 9.70 percent
10
66. Over the past five years, Delta, Inc., stock produced returns of 12.4, 16.8, 2.1, -11.7, and 9.4 percent,
respectively. For the same five years, the risk-free rate 4.8, 5.2, 4.1, 3.7, and 4.2 percent, respectively.
What was the arithmetic average risk premium for this time period?
A. 1.40 percent
B. 3.28 percent
C. 4.42 percent
D. 5.80 percent
E. 7.00 percent
67. Super Stock, Inc., produced returns of 14.6, 19.2, 24.8 and 31.6 percent, respectively, over the last four
years. The risk-free rate for this period was 5.6, 6.5, 6.8, and 5.4 percent, respectively. What was the
variance of the risk premium for this time period?
A. .04298
B. .05749
C. .06445
D. .06807
E. .07213
68. You own a stock which produced annual returns of 7.8, 11.2, 9.6, and -2.4 percent, respectively, over the
last four years. The risk-free rate over this period was 4.2, 5.3, 4.8, and 4.1 percent, respectively. What
was the standard deviation of the risk premium for this time period?
A. 4.95 percent
B. 5.03 percent
C. 5.54 percent
D. 5.71 percent
E. 5.84 percent
69. A stock had returns of 12, 7, 14, -11, and 5 percent, respectively, over the past five years. What is the
arithmetic average return?
A. 5.01 percent
B. 5.40 percent
C. 6.30 percent
D. 6.75 percent
E. 9.80 percent
70. For the past five years, a stock produced annual returns of 12, 4, -24, 29, and 16 percent, respectively.
What is the arithmetic average return?
A. 5.78 percent
B. 5.93 percent
C. 6.07 percent
D. 6.88 percent
E. 7.40 percent
71. You own a stock which has produced an arithmetic average return of 4.8 percent over the past five years.
The annual returns for the first four years were 9, 14, -7, and 2 percent, respectively. What rate of return
did the stock earn in the fifth year?
A. 3 percent
B. 4 percent
C. 6 percent
D. 7 percent
E. 9 percent
11
72. An asset had returns of 12, -21, 4, 19, and 15 percent, respectively, over the past five years. What was
the arithmetic average return for this time period?
A. 4.60 percent
B. 4.72 percent
C. 5.41 percent
D. 5.80 percent
E. 5.93 percent
73. A particular stock had year end prices of $35, $38, $36, and $31 over the past four years, respectively.
What was the arithmetic average return for this time period?
A. -4.13 percent
B. -3.53 percent
C. -2.18 percent
D. 2.02 percent
E. 3.43 percent
74. A stock had returns of 11, 14, -6, and 7 percent over the past four years, respectively. What was the
average geometric return?
A. 6.21 percent
B. 6.50 percent
C. 8.01 percent
D. 8.37 percent
E. 9.45 percent
75. You invested $3,000 ten years ago. The arithmetic average return on your investment is 11.7 percent and
the geometric average return is 10.8 percent. What is the value of your portfolio today?
A. $8,366
B. $8,422
C. $8,506
D. $8,989
E. $9,071
76. Sallie invested $6,000 seven years ago. Her arithmetic average return is 14.2 percent, and her geometric
average return is 13.6 percent. What is Sallie's portfolio value today?
A. $13,989
B. $14,203
C. $14,649
D. $14,807
E. $15,199
77. A stock produced annual returns of 6, -13, 7, 22, and 9 percent over the past five years. What is the
geometric average return?
A. 5.58 percent
B. 5.71 percent
C. 5.93 percent
D. 6.78 percent
E. 7.03 percent
12
What is the geometric average return?
A. 5.42 percent
B. 7.72 percent
C. 9.74 percent
D. 10.67 percent
E. 13.51 percent
79. A portfolio had an original value of $8,500 eight years ago. The current value of the portfolio is $45,289.
What is the average geometric return on this portfolio?
A. 16.17 percent
B. 17.08 percent
C. 19.34 percent
D. 20.72 percent
E. 23.26 percent
80. An initial investment of $3,500 ten years ago is worth $18,837.21 today. What is the geometric average
return?
A. 16.89 percent
B. 17.14 percent
C. 17.67 percent
D. 18.33 percent
E. 18.87 percent
81. A particular stock had year end prices of $27, $33, $41, and $32 over the past four years, respectively.
What was the geometric average return for this time period?
A. 5.83 percent
B. 6.04 percent
C. 6.28 percent
D. 6.79 percent
E. 6.81 percent
82. The geometric return on a stock over the past 15 years has been 9.3 percent. The arithmetic return over
the same period was 11.1 percent. What is the best estimate of the return on this stock over the next 10
years?
A. 8.47 percent
B. 9.48 percent
C. 9.94 percent
D. 10.20 percent
E. 10.36 percent
83. The geometric return on an asset over the past 20 years has been 11.6 percent. The arithmetic return over
the same period was 13.6 percent. What is the best estimate of the return on this asset over the next 10
years?
A. 12.60 percent
B. 12.65 percent
C. 12.71 percent
D. 12.75 percent
E. 12.82 percent
13
84. A stock has an average arithmetic return of 10.4 percent and an average geometric return of 8.8 percent
based on the annual returns for the last 25 years. What is your estimate of the annual return on this stock
over the next 5 years?
A. 9.60 percent
B. 9.84 percent
C. 10.00 percent
D. 10.13 percent
E. 10.50 percent
85. Terri owns a stock which has produced an average geometric return of 9.7 percent and an average
arithmetic return of 11.4 percent over the past 18 years. What annual rate of return should Terri expect to
earn on this security over the next 6 years?
A. 7.03 percent
B. 7.33 percent
C. 8.10 percent
D. 10.55 percent
E. 10.90 percent
14
ch1 Key
1. The total dollar return on an equity investment is defined as the:
A. increase in value of a share of stock over a period of time.
B. income received divided by the initial value of the security.
C. capital gain or loss plus any dividend income.
D. realized capital gain or loss.
E. dividend income received.
Jordan - Chapter 01 #1
Topic: TOTAL RETURN
Type: Definitions
2. The annual dividend at time t + 1 divided by the stock price at time t is called the:
A. annualized rate of return.
B. capital gain.
C. total annual rate of return.
D. total dollar return.
E. dividend yield.
Topic: DIVIDEND YIELD
Type: Definitions
3. The capital gains yield is equal to:

A. (Pt Pt + 1 + Dt + 1) / Pt + 1.
B. (Pt + 1 - Pt + Dt) / Pt.
C. Dt + 1 / Pt.
D. (Pt + 1 Pt) / Pt.
E. (Pt + 1 Pt) / Pt + 1.
Topic: CAPITAL GAINS YIELD
Type: Definitions
4. 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 rate of inflation.
E. a riskless investment.
Topic: RISK PREMIUM
Type: Definitions
5. The standard deviation is a measure of:

A. total return.
B. dividend income.
C. capital gains and losses.
D. a frequency distribution.
E. volatility.
Topic: STANDARD DEVIATION
Type: Definitions
1
6. The variance measures the:
A. total difference between the actual returns and the average return.
B. average squared difference between the actual returns and the average return.
C. total difference between the average squared returns and the risk-free return.
D. average squared difference between the actual returns and the risk-free return.
E. average difference between the actual squared returns and the risk-free return.
Topic: VARIANCE
Type: Definitions
7. The frequency distribution, which is completely defined by its average and standard deviation, is
referred to as a(n):
A. normal distribution.
B. variance distribution.
C. expected rate of return.
D. average geometric return.
E. average arithmetic return.
Topic: NORMAL DISTRIBUTION
Type: Definitions
8. The rate of return earned on a U.S. Treasury bill is referred to as the:

A. risk premium.
B. deflated rate of return.
C. risk-free rate.
D. expected rate of return.
E. market rate of return.
Topic: RISK-FREE RATE
Type: Definitions
9. The arithmetic average return is the:

A. summation of the returns for a number of years divided by the number of years minus one.
Topic: ARITHMETIC AVERAGE RETURN
Type: Definitions
10. The geometric average return is the:

A. summation of the returns for a number of years divided by the nth root where n equals the number
of years.
Topic: GEOMETRIC AVERAGE RETURN
Type: Definitions
2
11. The value which is equal to the ending price of a security minus the beginning price is called the:
A. dividend yield.
B. capital gain or loss.
C. arithmetic dollar return.
D. geometric dollar return.
Topic: CAPITAL GAIN
Type: Definitions
12. The reward for bearing risk is called the:

A. risk premium.
B. average return.
C. total return.
D. geometric return.
E. real return.
Topic: RISK PREMIUM
Type: Definitions
13. The risk-free rate which is paid as compensation for waiting is referred to as the:
A. real rate of return.
B. average real return.
C. financial reward.
D. time value of money.
Topic: TIME VALUE OF MONEY
Type: Definitions
14. The fact that higher returns are associated with higher standard deviations is known as the:
A. real return factor.
B. geometric relationship.
C. risk-return tradeoff.
E. market variance.
Topic: RISK-RETURN TRADE-OFF
Type: Definitions
15. The square root of the variance is called the:

A. geometric return.
B. standard deviation.
C. normal distribution.
D. frequency distribution.
E. dispersion.
Type: Definitions
3
16. Another name for a normal distribution is the:
A. risk-return trade-off.
B. bell curve.
C. geometric dispersion.
D. average tendency.
E. time value continuum.
Type: Definitions
17. Jeff purchased a stock for $21 and later sold it for $27. He also received a dividend of $1.40. The
total percentage return on his investment is computed as:
A. $27 - $21.
B. $27 - $21 + $1.40.
C. ($27 - $21) / $27.
D. ($27 - $21 + $1.40) / $21.
E. ($27 - $21 + $1.40) / $27.
Topic: TOTAL PERCENTAGE RETURN
Type: CONCEPTS
18. The dividend yield on a stock will be _____ and the capital gains yield will be _____.
A. positive; either positive or zero
B. positive; positive
C. positive; negative, positive, or zero
D. positive or zero; positive or zero
E. positive or zero; negative, positive, or zero
Topic: DIVIDEND AND CAPITAL GAIN YIELDS
Type: CONCEPTS
19. Capital gains are included in the return on an investment:

A. on an annual basis.
B. whenever the investment is sold and the capital gain is realized.
C. whenever dividends are paid.
D. whenever they occur, whether or not the investment is sold.
E. only if the investment incurs a loss in value or is sold.
Topic: CAPITAL GAINS
Type: CONCEPTS
20. If you multiply the number of shares of outstanding stock for a firm by the price per share, you are
computing the firm's:
A. equity ratio.
B. total book value.
C. market share.
E. time value.
Topic: MARKET CAPITALIZATION
Type: CONCEPTS
4
21. Which one of the following had the narrowest bell curve for the period 1926-2005?
E. U. S. Treasury bills
Topic: HISTORICAL RISK
Type: CONCEPTS
22. Which one of the following had the greatest volatility for the period 1926-2005?
Type: CONCEPTS
23. Which one of the following had the lowest standard deviation of returns for the period 1926-2005?
D. intermediate-term government bonds
Type: CONCEPTS
24. Which one of the following had the highest average return for the period 1926-2005?
Topic: HISTORICAL RETURNS
Type: CONCEPTS
25. Which one of the following has historically produced a return which is closest to the inflation rate?
D. U.S. Treasury bills
Type: CONCEPTS
5
26. Inflation, as measured by the Consumer Price Index, was highest during the period:
A. 1935-1938.
B. 1947-1950.
C. 1978-1981.
D. 1986-1989.
E. 1996-1999.
Type: CONCEPTS
27. Large-company stocks produced the highest rates of return during the period:
A. 1946-1949.
B. 1966-1969.
C. 1984-1987.
D. 1990-1993.
E. 1995-1998.
Type: CONCEPTS
28. Which category(ies) of investments had an annual rate of return that exceeded 100 percent for at least
one year during the period 1926-2005?
A. only large-company stocks
B. both large-company and small-company stocks
C. only small-company stocks
D. corporate bonds, large-company stocks, and small-company stocks
E. No category earned an annual return in excess of 100 percent.
Type: CONCEPTS
29. For the period 1801-2001, gold:

A. outperformed stocks, bonds, and inflation.
B. outperformed inflation and U.S. Treasury bills.
C. outperformed bonds and underperformed stocks.
D. outperformed U.S. Treasury bills and underperformed bonds.
E. underperformed stocks, bonds, and U.S. Treasury bills.
Type: CONCEPTS
30. The greatest one-day percentage decline in the Dow-Jones Industrial Average occurred on:
A. October 19, 1987.
B. October 28, 1929.
C. October 18, 1937.
D. December 12, 1914.
E. December 18, 1899.
Type: CONCEPTS
6
31. Which one of the following had the highest risk premium for the period 1926-2005?
A. U.S. Treasury bills
B. long-term government bonds
C. large-company stocks
Topic: RISK PREMIUM
Type: CONCEPTS
32. Historically, the higher the risk premium, the ______ the average return, and the _____ the standard
deviation of the returns.
A. higher; higher
B. higher; lower
C. lower; higher
D. lower; lower
E. There is no relationship between the risk premium and the average return.
Topic: RISK PREMIUM
Type: CONCEPTS
33. The 95 percent probability range of a normal distribution is defined as the mean plus or minus _____
standard deviation(s).
A. one
B. two
C. three
D. four
E. five
Topic: PROBABILITY RANGES
Type: CONCEPTS
34. The mean plus or minus one standard deviation defines the _____ percent probability range of a
normal distribution.
A. 50
B. 68
C. 82
D. 90
E. 95
Topic: PROBABILITY RANGES
Type: CONCEPTS
35. The mean return on large-company stocks for a ten-year period is equal to:
A. the arithmetic average return for the period.
B. the geometric average return for the period.
C. the total return for the period divided by N - 1.
D. zero.
E. one.
Type: CONCEPTS
7
36. If you want to increase the potential annual return on your investments, you will need to:
A. increase your investment in bonds and lower your investment in stocks.
B. increase your investment in U.S. Treasury bills and lower your investment in corporate bonds.
C. increase your portfolio's level of risk.
D. reduce the expected variability of your returns.
E. reduce the standard deviation of your returns.
Topic: RISK AND RETURN
Type: CONCEPTS
37. Which one of the following statements is correct?

A. U.S. Treasury bills have a risk premium equal to one percent.
B. Large-company stocks have historically been more risky than small-company stocks.
C. The mean is a measure of volatility.
D. A risky asset will always earn a greater annual rate of return than a riskless asset.
E. There is a direct relationship between risk and return.
Type: CONCEPTS
38. The wider the distribution of an investment's returns over time, the _____ the expected rate of return
and the ______ the standard deviation of returns.
A. higher; higher
B. higher; lower
C. lower; higher
D. lower; lower
E. The distribution of returns does not affect the expected rate of return.
Type: CONCEPTS
39. Which one of the following represents the best method of measuring the return on an investment?
A. nominal dollar return
B. real dollar return
C. absolute dollar return
D. percentage return
E. variance return
Topic: RATES OF RETURN
Type: CONCEPTS
40. A stock has varying annual rates of return over a 10-year period and a positive geometric average
return for the period. Given this, you know the arithmetic average return will be:
A. positive but less than the geometric average return.
B. less than the geometric return and could be negative, zero, or positive.
C. equal to the geometric average return.
D. either equal to or greater than the geometric average return.
E. greater than the geometric average return.
Topic: GEOMETRIC VERSUS ARITHMETIC AVERAGE
Type: CONCEPTS
8
41. The geometric return on an asset is approximately equal to the arithmetic return:
A. plus one-half the standard deviation.
B. plus one-half the variance.
C. minus one-half the standard deviation.
D. minus one-half the variance.
E. times one-half.
Topic: GEOMETRIC VERSUS ARITHMETIC RETURNS
Type: CONCEPTS
42. The purpose of Blume's formula is to:

A. predict future rates of return.
B. convert an arithmetic rate of return into a geometric rate of return.
C. convert a geometric average rate of return into an arithmetic average rate of return.
D. measure past performance in a consistent manner.
E. compute the historical mean return over a multi-year period of time.
Topic: BLUME'S FORMULA
Type: CONCEPTS
43. A stock is quoted at 26.32, up .20. The current stock price is _____ and the prior day's trading price
was _____.
A. $26.12; $26.32
B. $26.52; $26.32
C. $26.32; $26.12
D. $26.32; $26.32
E. $26.32; $26.52
Topic: STOCK QUOTE
Type: CONCEPTS
44. The common stock of Acadia, Inc., sold for $32.90 at the beginning of the year and $33.12 at the end
of the year. During the year, the stock paid $1.10 in dividends. What was the dividend yield for the
year?
A. 3.30 percent
B. 3.32 percent
C. 3.34 percent
D. 3.36 percent
E. 3.38 percent
$1.10 / $32.90 = .03343 = 3.34 percent

Type: PROBLEMS
9
45. You purchased a stock for $42.60 a share and sold it one year later for $44.30 a share. You received a
total of $2.10 in dividends. What was your dividend yield on this investment?
A. 4.74 percent
B. 4.77 percent
C. 4.84 percent
D. 4.89 percent
E. 4.93 percent
$2.10 / $42.60 = .04930 = 4.93 percent

Type: PROBLEMS
46. You purchased 200 shares of a stock for $28.33 a share and sold the shares one year later for $27.16 a
share. Over the year, you received a total of $.90 in dividends per share. What was your capital gains
yield on this investment?
A. -4.31 percent
B. -4.27 percent
C. -4.13 percent
D. -0.99 percent
E. -0.95 percent
($27.16 - $28.33) / $28.33 = -.04130 = -4.13 percent

Type: PROBLEMS
47. Today, you sold 500 shares of Delta More, Inc., for $62.80 a share. You bought the shares one year
ago at a price of $58.24 a share. Over the year, you received a total of $600 in dividends. What was
your capital gains yield on this investment?
A. 7.26 percent
B. 7.83 percent
C. 8.43 percent
D. 9.17 percent
E. 9.89 percent
($62.80 - $58.24) / $58.24 = .07830 = 7.83 percent

Type: PROBLEMS
10
48. One year ago, you purchased 300 shares of Sith Brothers, Inc., at $51.64 a share. The stock paid a
total of $660 in dividends during the year. Today, you sold your shares for $52.08 share. What is
your total return on this investment?
A. 5.05 percent
B. 5.11 percent
C. 5.19 percent
D. 8.45 percent
E. 8.52 percent
[$52.08 $51.64 + ($660 / 300)] / $51.64 = .05112 = 5.11 percent

Topic: TOTAL RETURN
Type: PROBLEMS
49. You purchase a stock at the beginning of the year for $76.20 a share. Your total return for the year
was 12.6 percent and the dividend yield was 3.2 percent. What was the price of the stock at the end of
the year?
A. $69.65
B. $74.07
C. $83.36
D. $85.80
E. $89.22
CG yield = 12.6 percent 3.2 percent = 9.4 percent

Topic: TOTAL RETURN
Type: PROBLEMS
50. A stock sold for $38.20 at the beginning of the year. The end of year stock price was $40.11. What
was the amount of the annual dividend if the total return for the year was 9.712 percent?
A. $1.50
B. $1.54
C. $1.60
D. $1.76
E. $1.80
($40.11 $38.20 + D) / $38.20 = .09712; $40.11 $38.20 + D = $3.709984; D = $1.799984 = $1.80

Topic: TOTAL RETURN
Type: PROBLEMS
11
51. You purchased 100 shares of stock at a price of $71.05 and received a dividend of $1.34 per share.
You sold the stock for $72.36. What was your total dollar return?
A. $131
B. $185
C. $230
D. $265
E. $300
100 ($72.36 $71.05 + $1.34) = $265

Topic: TOTAL RETURN
Type: PROBLEMS
52. You own a stock that dropped in price from $54.90 to $46.08. The dividend yield is 1.2 percent.
What is your total return?
A. -13.73 percent
B. -14.87 percent
C. -16.07 percent
D. -17.94 percent
E. -19.14 percent
[($46.08 - $54.90) / $54.90] + .012 = -.14866 = -14.87 percent

Topic: TOTAL RETURN
Type: PROBLEMS
53. You plan to buy a stock and hold it for one year. You expect the stock price to be $54 a share at the
end of the year and you expect to receive an annual dividend of $2.20 a share. How much are you
willing to pay per share today if you desire a 12.5 percent rate of return on this investment?
A. $48.17
B. $49.96
C. $50.63
D. $50.87
E. $51.24
.125 = ($54 P0 + $2.20) / P0

Topic: TOTAL RETURN
Type: PROBLEMS
12
54. An asset has annual returns of 11, 17, 3, -21, and 18 percent, respectively, for the last five years.
What is the variance of these returns?
A. .02568
B. .04212
C. .04141
D. .08288
E. .10272
(.11 + .17 + .03 - .21 + .18) / 5 = .056

Topic: VARIANCE
Type: PROBLEMS
55. For the past four years, ABC stock had annual returns of 5, 11, 7, and 19 percent, respectively. What
is the variance of these returns?
A. .003833
B. .005216
C. .007487
D. .009416
E. .011500
(.05 + .11 + .07 + .19) / 4 = .105

Topic: VARIANCE
Type: PROBLEMS
the variance of the returns for this time period?
A. .00428
B. .00509
C. .00667
D. .00781
E. .00824
(.11 - .08 + .12 + .09 + .07) / 5 = .062

Topic: VARIANCE
Type: PROBLEMS
13
57. An asset has annual returns of 16, 10, 3, -18, and 21 percent, respectively, for the last five years.
What is the standard deviation of these returns?
A. 13.60 percent
B. 14.14 percent
C. 14.68 percent
D. 15.03 percent
E. 15.21 percent
(.16 + .10 + .03 - .18 + .21) / 5 = .064

Type: PROBLEMS
58. Over the last four years, a stock produced returns of 14, 9, -7, and 12 percent, respectively. What is
the standard deviation of these returns?
A. 8.18 percent
B. 9.56 percent
C. 11.23 percent
D. 16.55 percent
E. 16.82 percent
(.14 + .09 - .07 + .12) / 4 = .07 [(.14 - .07)2 + (.09 - .07)2 + (-.07 - .07)2 + (.12 - .07)2] / (4 -1) =
[.0049 + .0004 + .0196 + .0025] / 3 = .00913333(.00913333) = .09557 = 9.56 percent

Type: PROBLEMS
59. A stock had returns of 9, -4, 7, and 6 percent, respectively, over the past four years. What was the
standard deviation of the returns for this time period?
A. 5.80 percent
B. 6.82 percent
C. 7.15 percent
D. 8.98 percent
E. 10.05 percent
(.09 - .04 + .07 + .06) / 4 = .045[(.09 - .045)2) + (-.04- .045)2) + (.07- .045)2) + (.06- .045)2] / (4 - 1)
= [.002025 + .007225 + .000625 + .000225] / 3 = .003366667(.003366667 = .05802 = 5.80 percent

Type: PROBLEMS
14
60. An asset has an arithmetic average return of 12 percent, a geometric average return of 9.6 percent,
and a standard deviation of 22 percent. What range of returns would you expect to see 95 percent of
the time?
12 percent 2(22 percent) = 32 to +56 percent

Type: PROBLEMS
61. A stock has an average return of 12.8 percent and a standard deviation of 27.2 percent. What range of
returns would you expect to see approximately two-thirds of the time?
12.8 percent 27.2 percent = 14.4 to +40.0 percent

Type: PROBLEMS
62. An asset has a return of 14.6 percent and a variance of .080656. What range of returns would you
expect to see approximately two-thirds of the time?
D. -6.53 to +22.67 percent
14.6 percent (.080656) = 14.6 percent 28.4 percent = -13.8 to +43.0 percent

Type: PROBLEMS
15
63. Stephen owns a stock which has an arithmetic average return of 9.2 percent, and a standard deviation
of 11.4 percent. There is only a 2.5 percent chance that the stock will produce a return greater than
______ percent in any one year.
A. 20.6 percent
B. 22.8 percent
C. 32.0 percent
D. 43.4 percent
E. 54.8 percent
9.2 percent + 2(11.4 percent) = 32.0 percent

Type: PROBLEMS
64. You own a stock with an average historical risk premium of 6.8 percent. The risk-free rate next year
is expected to be 4.6 percent. What rate of return should you expect on your stock for next year?
A. 2.10 percent
B. 2.20 percent
C. 11.11 percent
D. 11.40 percent
E. 11.71 percent
4.6 percent + 6.8 percent = 11.4 percent

Topic: RISK PREMIUM
Type: PROBLEMS
65. A stock has a return of 14.7 percent, and the risk-free rate is 5.2 percent. What is the risk premium for
this stock?
A. 9.03 percent
B. 9.27 percent
C. 9.50 percent
D. 9.66 percent
E. 9.70 percent
14.7 percent 5.2 percent = 9.5 percent

Topic: RISK PREMIUM
Type: PROBLEMS
16
66. Over the past five years, Delta, Inc., stock produced returns of 12.4, 16.8, 2.1, -11.7, and 9.4 percent,
respectively. For the same five years, the risk-free rate 4.8, 5.2, 4.1, 3.7, and 4.2 percent, respectively.
What was the arithmetic average risk premium for this time period?
A. 1.40 percent
B. 3.28 percent
C. 4.42 percent
D. 5.80 percent
E. 7.00 percent
[(.124 - .048) + (.168 - .052) + (.021 -.041) + (-.117 -.037) + (.094 - .042)] / 5 = [.076 + 116 - .02 -
.154 + .052) / 5 = .014 = 1.40 percent

Topic: AVERAGE RISK PREMIUM
Type: PROBLEMS
67. Super Stock, Inc., produced returns of 14.6, 19.2, 24.8 and 31.6 percent, respectively, over the last
four years. The risk-free rate for this period was 5.6, 6.5, 6.8, and 5.4 percent, respectively. What was
the variance of the risk premium for this time period?
A. .04298
B. .05749
C. .06445
D. .06807
E. .07213
[(.146 - .056) + (.192 -2 .065) + (.248 -.068) + (-.316 -.054) ] / 4 = [.09 + .127 + .18 - .37) / 4 =
.00675[(.09 .00675) + (.127 .00675)2 + (.18 .00675)2 + (-.37 .00675)2] / (4 1) = [.006931 +
.014460 + .030016 + .141941] / 3 = .064449 = .06445

Topic: RISK PREMIUM VARIANCE
Type: PROBLEMS
68. You own a stock which produced annual returns of 7.8, 11.2, 9.6, and -2.4 percent, respectively, over
the last four years. The risk-free rate over this period was 4.2, 5.3, 4.8, and 4.1 percent, respectively.
What was the standard deviation of the risk premium for this time period?
A. 4.95 percent
B. 5.03 percent
C. 5.54 percent
D. 5.71 percent
E. 5.84 percent
Topic: RISK PREMIUM STANDARD DEVIATION
Type: PROBLEMS
17
69. A stock had returns of 12, 7, 14, -11, and 5 percent, respectively, over the past five years. What is the
arithmetic average return?
A. 5.01 percent
B. 5.40 percent
C. 6.30 percent
D. 6.75 percent
E. 9.80 percent
(.12 + .07 + .14 - .11 + .05) / 5 = .054 = 5.40 percent

Topic: ARITHMETIC RETURN
Type: PROBLEMS
What is the arithmetic average return?
A. 5.78 percent
B. 5.93 percent
C. 6.07 percent
D. 6.88 percent
E. 7.40 percent
(.12 + .04 - .24 + .29 + .16) / 5 = .0740 = 7.40 percent

Type: PROBLEMS
71. You own a stock which has produced an arithmetic average return of 4.8 percent over the past five
years. The annual returns for the first four years were 9, 14, -7, and 2 percent, respectively. What rate
of return did the stock earn in the fifth year?
A. 3 percent
B. 4 percent
C. 6 percent
D. 7 percent
E. 9 percent
.048 5 = .24

Type: PROBLEMS
18
the arithmetic average return for this time period?
A. 4.60 percent
B. 4.72 percent
C. 5.41 percent
D. 5.80 percent
E. 5.93 percent
(.12 - .21 + .04 + .19 + .15) / 5 = .058 = 5.80 percent

Type: PROBLEMS
73. A particular stock had year end prices of $35, $38, $36, and $31 over the past four years,
respectively. What was the arithmetic average return for this time period?
A. -4.13 percent
B. -3.53 percent
C. -2.18 percent
D. 2.02 percent
E. 3.43 percent
Type: PROBLEMS
74. A stock had returns of 11, 14, -6, and 7 percent over the past four years, respectively. What was the
average geometric return?
A. 6.21 percent
B. 6.50 percent
C. 8.01 percent
D. 8.37 percent
E. 9.45 percent
[(1 + .11)(1 + .14)(1 - .06)(1 + .07)]1/4 1 = .062147 = 6.21 percent

Topic: GEOMETRIC RETURN
Type: PROBLEMS
75. You invested $3,000 ten years ago. The arithmetic average return on your investment is 11.7 percent
and the geometric average return is 10.8 percent. What is the value of your portfolio today?
A. $8,366
B. $8,422
C. $8,506
D. $8,989
E. $9,071
$3,000 (1 + .108)10 = $8,366.02 = $8,366

Type: PROBLEMS
19
76. Sallie invested $6,000 seven years ago. Her arithmetic average return is 14.2 percent, and her
geometric average return is 13.6 percent. What is Sallie's portfolio value today?
A. $13,989
B. $14,203
C. $14,649
D. $14,807
E. $15,199
$6,000(1 + .136)7 = $14,648.72 = $14,649

Type: PROBLEMS
77. A stock produced annual returns of 6, -13, 7, 22, and 9 percent over the past five years. What is the
geometric average return?
A. 5.58 percent
B. 5.71 percent
C. 5.93 percent
D. 6.78 percent
E. 7.03 percent
[(1 +.06)(1 - .13)(1 + .07)(1 + .22)(1+ .09)]1/5 1 = .05584 = 5.58 percent

Type: PROBLEMS
What is the geometric average return?
A. 5.42 percent
B. 7.72 percent
C. 9.74 percent
D. 10.67 percent
E. 13.51 percent
[(1 + .08)(1 + .11)(1 .13)(1 + .22)(1 + .14)]1/5 1 = .07722 = 7.72 percent

Type: PROBLEMS
20
79. A portfolio had an original value of $8,500 eight years ago. The current value of the portfolio is
$45,289. What is the average geometric return on this portfolio?
A. 16.17 percent
B. 17.08 percent
C. 19.34 percent
D. 20.72 percent
E. 23.26 percent
$8,500 = $45,289 / (1 + R)8; ($45,289 / $8,500)1/8 1 = R; R = .23260 = 23.26 percent

Type: PROBLEMS
80. An initial investment of $3,500 ten years ago is worth $18,837.21 today. What is the geometric
average return?
A. 16.89 percent
B. 17.14 percent
C. 17.67 percent
D. 18.33 percent
E. 18.87 percent
$18,837.21 = $3,500 (1 + R)10; ($18,837.21 / $3,500)1/10 1 = R; R =.18330 = 18.33 percent

Type: PROBLEMS
81. A particular stock had year end prices of $27, $33, $41, and $32 over the past four years,
respectively. What was the geometric average return for this time period?
A. 5.83 percent
B. 6.04 percent
C. 6.28 percent
D. 6.79 percent
E. 6.81 percent
($32 / $27)1/3 1 = .058267 = 5.83 percent

Type: PROBLEMS
21
82. The geometric return on a stock over the past 15 years has been 9.3 percent. The arithmetic return
over the same period was 11.1 percent. What is the best estimate of the return on this stock over the
next 10 years?
A. 8.47 percent
B. 9.48 percent
C. 9.94 percent
D. 10.20 percent
E. 10.36 percent
{[(10 1) / (15 1)] .093} + {[(15 10) / (15 1)] .111} = .059786 + .039643 = .099429 = 9.94
percent

Type: PROBLEMS
83. The geometric return on an asset over the past 20 years has been 11.6 percent. The arithmetic return
over the same period was 13.6 percent. What is the best estimate of the return on this asset over the
next 10 years?
A. 12.60 percent
B. 12.65 percent
C. 12.71 percent
D. 12.75 percent
E. 12.82 percent
{[(10 1) / (20 1)] .116} + {[(20 10) / (20 1)] .136} = .054947 + .071579 = .12653 = 12.65
percent

Type: PROBLEMS
84. A stock has an average arithmetic return of 10.4 percent and an average geometric return of 8.8
percent based on the annual returns for the last 25 years. What is your estimate of the annual return
on this stock over the next 5 years?
A. 9.60 percent
B. 9.84 percent
C. 10.00 percent
D. 10.13 percent
E. 10.50 percent
{[(5 1) / (25 1)] .088} + {[(25 5) / (25 1)] .104} = .014667 + .086667 = .101334 = 10.13
percent

Type: PROBLEMS
22
85. Terri owns a stock which has produced an average geometric return of 9.7 percent and an average
arithmetic return of 11.4 percent over the past 18 years. What annual rate of return should Terri
expect to earn on this security over the next 6 years?
A. 7.03 percent
B. 7.33 percent
C. 8.10 percent
D. 10.55 percent
E. 10.90 percent
{[(6 1) / (18 1)] .097} + {[(18 6) / (18 1)] .114} = .028529 + .080471 = .109000 = 10.90
percent.

Type: PROBLEMS
23
ch1 Summary
Category # of Questions
Jordan - Chapter 01 85
Topic: ARITHMETIC AVERAGE RETURN 1
Topic: ARITHMETIC RETURN 5
Topic: AVERAGE RISK PREMIUM 1
Topic: BLUME'S FORMULA 5
Topic: CAPITAL GAIN 1
Topic: CAPITAL GAINS 1
Topic: CAPITAL GAINS YIELD 3
Topic: DIVIDEND AND CAPITAL GAIN YIELDS 1
Topic: DIVIDEND YIELD 3
Topic: GEOMETRIC AVERAGE RETURN 1
Topic: GEOMETRIC RETURN 8
Topic: GEOMETRIC VERSUS ARITHMETIC AVERAGE 1
Topic: GEOMETRIC VERSUS ARITHMETIC RETURNS 1
Topic: HISTORICAL RETURNS 7
Topic: HISTORICAL RISK 3
Topic: MARKET CAPITALIZATION 1
Topic: NORMAL DISTRIBUTION 7
Topic: PROBABILITY RANGES 2
Topic: RATES OF RETURN 1
Topic: RISK AND RETURN 3
Topic: RISK PREMIUM 6
Topic: RISK PREMIUM STANDARD DEVIATION 1
Topic: RISK PREMIUM VARIANCE 1
Topic: RISK-FREE RATE 1
Topic: RISK-RETURN TRADE-OFF 1
Topic: STANDARD DEVIATION 5
Topic: STOCK QUOTE 1
Topic: TIME VALUE OF MONEY 1
Topic: TOTAL PERCENTAGE RETURN 1
Topic: TOTAL RETURN 7
Topic: VARIANCE 4
Type: CONCEPTS 27
Type: Definitions 16
Type: PROBLEMS 42

ch1 - Investment

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ch1 - Investment

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1. The total dollar return on an equity investment is defined as the:

3. The capital gains yield is equal to:

4. The risk premium is defined as the rate of return on:

5. The standard deviation is a measure of:

8. The rate of return earned on a U.S. Treasury bill is referred to as the:

9. The arithmetic average return is the:

10. The geometric average return is the:

12. The reward for bearing risk is called the:

15. The square root of the variance is called the:

19. Capital gains are included in the return on an investment:

29. For the period 1801-2001, gold:

37. Which one of the following statements is correct?

42. The purpose of Blume's formula is to:

$1.10 / $32.90 = .03343 = 3.34 percent

Jordan - Chapter 01 #44

$2.10 / $42.60 = .04930 = 4.93 percent

Jordan - Chapter 01 #45

($27.16 - $28.33) / $28.33 = -.04130 = -4.13 percent

Jordan - Chapter 01 #46

($62.80 - $58.24) / $58.24 = .07830 = 7.83 percent

Jordan - Chapter 01 #47

[$52.08 $51.64 + ($660 / 300)] / $51.64 = .05112 = 5.11 percent

Jordan - Chapter 01 #48

CG yield = 12.6 percent 3.2 percent = 9.4 percent

Jordan - Chapter 01 #49

($40.11 $38.20 + D) / $38.20 = .09712; $40.11 $38.20 + D = $3.709984; D = $1.799984 = $1.80

Jordan - Chapter 01 #50

100 ($72.36 $71.05 + $1.34) = $265

Jordan - Chapter 01 #51

[($46.08 - $54.90) / $54.90] + .012 = -.14866 = -14.87 percent

Jordan - Chapter 01 #52

.125 = ($54 P0 + $2.20) / P0

Jordan - Chapter 01 #53

(.11 + .17 + .03 - .21 + .18) / 5 = .056

Jordan - Chapter 01 #54

(.05 + .11 + .07 + .19) / 4 = .105

Jordan - Chapter 01 #55

(.11 - .08 + .12 + .09 + .07) / 5 = .062

Jordan - Chapter 01 #56

(.16 + .10 + .03 - .18 + .21) / 5 = .064

Jordan - Chapter 01 #57

Jordan - Chapter 01 #58

Jordan - Chapter 01 #59

12 percent 2(22 percent) = 32 to +56 percent

Jordan - Chapter 01 #60

12.8 percent 27.2 percent = 14.4 to +40.0 percent

Jordan - Chapter 01 #61

Jordan - Chapter 01 #62

9.2 percent + 2(11.4 percent) = 32.0 percent

Jordan - Chapter 01 #63

4.6 percent + 6.8 percent = 11.4 percent

Jordan - Chapter 01 #64

14.7 percent 5.2 percent = 9.5 percent

Jordan - Chapter 01 #65

Jordan - Chapter 01 #66

Jordan - Chapter 01 #67

(.12 + .07 + .14 - .11 + .05) / 5 = .054 = 5.40 percent

Jordan - Chapter 01 #69

(.12 + .04 - .24 + .29 + .16) / 5 = .0740 = 7.40 percent

Jordan - Chapter 01 #70

Jordan - Chapter 01 #71