MC Questions 1A - 1C ... 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%.

Question 1A) 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. $1.10 to $1.20

b. $1.40 to $1.50

c. Less than $1.00

d. More than $1.60

e. $1.00 to $1.10

f. $1.50 to $1.60

g. $1.30 to $1.40

h. $1.20 to $1.30

Question 1B)

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

Select one:

a. $1.40 to $1.50

b. More than $1.60

c. Less than $1.00

d. $1.00 to $1.10

e. $1.50 to $1.60

f. $1.20 to $1.30

g. $1.30 to $1.40

h. $1.10 to $1.20

Question 1C)

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. 1.00% to 2.00%

b. 2.00% to 3.00%

c. 0% to 1.00%

d. 3.00% to 4.00%

e. More than 8.00%

f. Negative

g. 4.00% to 5.00%

h. 5.00% to 6.00%

i. 6.00% to 7.00%

j. 7.00% to 8.00%

Question 1D)

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. 0% to 1.00%

b. 1.00% to 2.00%

c. Negative

d. 2.00% to 3.00%

e. 6.00% to 7.00%

f. 7.00% to 8.00%

g. 3.00% to 4.00%

h. 4.00% to 5.00%

i. More than 8.00%

j. 5.00% to 6.00%

Question 1E)

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

Select one:

a. 0% to 1.00%

b. 7.00% to 8.00%

c. More than 8.00%

d. 2.00% to 3.00%

e. 3.00% to 4.00%

f. 5.00% to 6.00%

g. Negative

h. 4.00% to 5.00%

i. 6.00% to 7.00%

j. 1.00% to 2.00%

Question 1F)

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

Select one:

a. 2.00% to 3.00%

b. 5.00% to 6.00%

c. 4.00% to 5.00%

d. 6.00% to 7.00%

e. 1.00% to 2.00%

f. 7.00% to 8.00%

g. More than 8.00%

h. 0% to 1.00%

i. Negative

j. 3.00% to 4.00%

Question 1G)

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

Select one:

a. More than 40%

b. 20% to 25%

c. 30% to 40%

d. 10% to 15%

e. 15% to 20%

f. 5% to 10%

g. 25% to 30%

h. 0% to 5%

Question 1H)

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 30% and a gain of 45% [that is, -30% < X < 45%]

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

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

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