MC Questions 16-23 ... Geometric Returns, Unit Values, Arithmetic Returns, and Standard Deviations

The following 8 questions refer to the follow returns for stocks for the first ten years of the century. These are total rate of returns; that is, both income and price. For example, the total rate of return for 2001 was a negative 11.85%.

If you invested $1.00 at the beginning of the time frame [1/1/2001], how much would your dollar be worth five years [5] later; that is, on 12/31/2005? Hint: Calculate your unit values.

	Total
Year	Return
2001	-11.85%
2002	3.97%
2003	28.36%
2004	10.74%
2005	6.83%
2006	15.61%
2007	8.48%
2008	-36.55%
2009	23.94%
2010	21.00%

Select one:

a. $1.30 to $1.40

b. $1.20 to $1.30

c. $1.50 to $1.60

d. More than $1.60

e. Less than $1.00

f. $1.00 to $1.10

g. $1.40 to $1.50

h. $1.10 to $1.20

How much would your initial dollar investment be worth at the end of year 10; that is, on 12/31/2010?

Select one:

a. $1.20 to $1.30

b. $1.40 to $1.50

c. $1.30 to $1.40

d. More than $1.60

e. $1.00 to $1.10

f. Less than $1.00

g. $1.10 to $1.20

h. $1.50 to $1.60

What was your Geometric Average Return [Fidelity calls them "Average Annual Returns"] for the five [5] years ending 12/31/2005 [Hint: Use the unit value that you calculated earlier.].

Select one:

a. 5.00% to 6.00%

b. 3.00% to 4.00%

c. 0% to 1.00%

d. Negative

e. 4.00% to 5.00%

f. 7.00% to 8.00%

g. 1.00% to 2.00%

h. 6.00% to 7.00%

i. More than 8.00%

j. 2.00% to 3.00%

What was your Geometric Average Return [Fidelity calls them "Average Annual Returns"] for the ten [10] years ending 12/31/2010 [Hint: Use the unit value that you calculated earlier.].

Select one:

a. 3.00% to 4.00%

b. 7.00% to 8.00%

c. 0% to 1.00%

d. 4.00% to 5.00%

e. 6.00% to 7.00%

f. 5.00% to 6.00%

g. 2.00% to 3.00%

h. More than 8.00%

i. Negative

j. 1.00% to 2.00%

What was your Arithmetic Average Return for the five [5] years ending 12/31/2005?

Select one:

a. 5.00% to 6.00%

b. 1.00% to 2.00%

c. 4.00% to 5.00%

d. 2.00% to 3.00%

e. 3.00% to 4.00%

f. Negative

g. 6.00% to 7.00%

h. 0% to 1.00%

i. 7.00% to 8.00%

j. More than 8.00%

What was your Arithmetic Average Return for the ten [10] years ending 12/31/2010?

Select one:

a. 1.00% to 2.00%

b. 0% to 1.00%

c. 4.00% to 5.00%

d. 2.00% to 3.00%

e. 3.00% to 4.00%

f. Negative

g. 5.00% to 6.00%

h. More than 8.00%

i. 7.00% to 8.00%

j. 6.00% to 7.00%

What was the Standard Deviation of Returns for the ten [10] years ending 12/31/2010?

Select one:

a. 30% to 40%

b. 10% to 15%

c. 5% to 10%

d. 25% to 30%

e. More than 40%

f. 15% to 20%

g. 20% to 25%

h. 0% to 5%

Assume that stock returns are normally distributed. Use the 10-year standard deviation that you just calculated.

Approximately, what range of returns would you expect 68% of the time for any given year?

Select one:

a. Between a loss of 10% and a gain of 25% [that is, -10% < X < 25%]

b. Between a loss of 10% and a gain of 10% [that is, -10% < X < 10%]

c. Between a loss of 5% and a gain of 18% [that is, -5% < X < 18%]

d. Between a loss of 20% and a gain of 20% [that is, -20% < X < 20%]

e. Between a loss of 30% and a gain of 45% [that is, -30% < X < 45%]