1. Suppose you bought a 16 percent coupon bond one year ago for $1,130.

The bond sells for $1,190 today.

What is your realized percentage return if you sell the bond today?

2. Suppose a stock had an initial price of $77 per share, paid a dividend of $1.05 per share during the year, and had an ending share price of $83.

What is the dividend yield?

What is the capital gains yield?

3. Average annual return is a good measure of expected return when?

A.Returns are volatile over time

B.The distribution of possible returns does not change over time

C.Negative estimation errors cancel out positive estimation errors

D.Never - this is not a good measure of expected return