practice questions lecture 10

Return on investment usually consists of which two components?

Select one:

a.dividends and profits

b.income and capital gain/loss

c.cash and non-cash

d.inflow and outflow

e.dollar return and percentage return

We have the following information on the share prices of Papa Smirph Corporation over the last five years. Calculate the total dollar return and percentage return on each share.

Year

Papa Smirph share price

Annual dividend per share

1 $20 dividend $1.00

2 $22 dividend $1.10

3 $24 dividend $1.20

4 $26 dividend $1.30

5 $28 dividend $1.40

Select one:

a.$12; 60%

b.$14; 70%

c.$19.7; 61.6%

d.$19.7; 98.5%

e.$12; 78.5%

Given the following share price history, what is the arithmetic average return per share?

Year

Share price

1 $20

2 $22

3 $24

4 $26

5 $28

Select one:

a.3.24%

b.4.05%

c.5.36%

d.8.78%

e.10.75%

XYZ Company's common share yields an average nominal return of 13.8%. Given the following Consumer Price Index history, what is the average real return per share?

Year

Consumer Price Index

1 100

2 101

3 102

4 103

5 104

Select one:

a.4.49%

b.5.59%

c.8.39%

d.10.89%

e.12.69%

We know that during the last 10 years, the average historical return on a market index is 15%. We also know that the average inflation rate and average risk-free rate over the last 10 years are 3% and 6%, respectively. What is the real risk premium using the exact Fisher equation?

Select one:

a.2.94%

b.6.86%

c.7.92%

d.8.74%

e.10.75%

Given the following share price history, calculate the standard deviation of the returns on this stock.

Year

Share price

1 $20

2 $22

3 $24

4 $26

5 $28

Select one:

a.0.01%

b.0.99%

c.1.81%

d.8.78%

e.9.95%

What is the geometric average return of a stock with the following share price history?

Year

Share price

1 $20

2 $22

3 $24

4 $26

5 $28

Select one:

a.9.09%

b.8.78%

c.8.33%

d.7.69%

e.6.48%

The distribution commonly used to describe expected returns and standard deviations in the stock market is the __________ distribution.

Select one:

a.Poisson

b.student's T

c.normal

d.binomial

e.log-normal

Assume that the historical average return on Canadian common stocks between 1957 and 2019 is 10.29%, with a standard deviation of 16.41%. This tells us that if we bought Canadian stocks during this period, we would expect our returns to be lower than -6.12% or higher than 26.70% in one year out of every

Select one:

a.two.

b.three.

c.four.

d.five.

e.six.

The absence of price movements in a world in which investors are bombarded with information every day would suggest

Select one:

a.market stability.

b.market instability.

c.market efficiency.

d.market inefficiency.

e.market inflation.