QUESTION 21

1. If on November 27, 2017, The Dow Jones Industrial Average closed at 12,958.44, which was up 215.04 that day. What was the return (in percent) of the stock market that day?

   	1.	+0.017 percent
   	2.	+1.69 percent
   	3.	1.69 percent
   	4.	0.017 percent

QUESTION 22

1. At your discount brokerage firm, it costs $8.50 per stock trade. How much money do you need to buy 200 shares of Apple (AAPL), which trades at $171.54?

   	1.	$34,299.50
   	2.	$34,316.50
   	3.	$36,008.00
   	4.	$32,608.00

3 points

QUESTION 23

1. A firm is expected to pay a dividend of $2.00 next year and $2.14 the following year. Financial analysts believe the stock will be at their target price of $75.00 in two years. Compute the value of this stock with a required return of 10 percent.

   	1.	$65.57
   	2.	$66.67
   	3.	$65.40
   	4.	$79.14

3 points

QUESTION 24

1. A firm does not pay a dividend. It is expected to pay its first dividend of $0.10 per share in two years. This dividend will grow at 11 percent indefinitely. Using a 13 percent discount rate, compute the value of this stock.

   	1.	$4.59
   	2.	$4.42
   	3.	$5.43
   	4.	$7.21

3 points

QUESTION 25

1. Which of these includes any capital gain (or loss) that occurred as well as any income that you received from a specific investment?

   	1.	dollar return
   	2.	market return
   	3.	portfolio
   	4.	average return

2 points

QUESTION 26

1. Which of these is a measure of risk to reward earned by an investment over a specific period of time?

   	1.	market deviation
   	2.	coefficient of variation
   	3.	standard deviation
   	4.	total variation

2 points

QUESTION 27

1. Which of these is the term for portfolios with the highest return possible for each risk level?

   	1.	optimal portfolios
   	2.	total portfolios
   	3.	efficient portfolios
   	4.	modern portfolios

2 points

QUESTION 28

1. Which statement is true?

   	1.	The larger the standard deviation, the higher the total risk.
   	2.	The larger the standard deviation, the lower the total risk.
   	3.	The standard deviation is not an indication of total risk.
   	4.	The larger the standard deviation, the more portfolio risk.

2 points

QUESTION 29

1. Rank the following three stocks by their level of total risk, highest to lowest. Rail Haul has an average return of 10 percent and standard deviation of 15 percent. The average return and standard deviation of Idol Staff are 15 percent and 25 percent; and of Poker-R-Us are 12 percent and 35 percent.

   	1.	Rail Haul, Poker-R-Us, Idol Staff
   	2.	Poker-R-Us, Idol Staff, Rail Haul
   	3.	Idol Staff, Poker-R-Us, Rail Haul
   	4.	Idol Staff, Rail Haul, Poker-R-Us

3 points

QUESTION 30

1. An investor owns $2,000 of Adobe Systems stock, $4,000 of Dow Chemical, and $6,000 of Office Depot. What are the portfolio weights of each stock?

   	1.	Adobe System = 0.3333, Dow Chemical = 0.3333, Office Depot = 0.3333
   	2.	Adobe System = 0.1667, Dow Chemical = 0.3333, Office Depot = 0.5
   	3.	Adobe System = 0.2, Dow Chemical = 0.4, Office Depot = 0.6
   	4.	Adobe System = 0.3333, Dow Chemical = 0.1667, Office Depot = 0.5

3 points

QUESTION 31

1. The past five monthly returns for K and Company are 2.28 percent, 2.64 percent, 1.05 percent, 4.25 percent, and 9.25 percent. What is the average monthly return?

   	1.	3.47 percent
   	2.	1.45 percent
   	3.	1.62 percent
   	4.	3.89 percent

3 points

QUESTION 32

1. At the beginning of the month, you owned $8,000 of Company G, $8,000 of Company S, and $3,000 of Company N. The monthly returns for Company G, Company S, and Company N were 7.80 percent, 1.50 percent, and 0.75 percent. What is your portfolio return?

   	1.	3.80 percent
   	2.	4.03 percent
   	3.	2.85 percent
   	4.	8.55 percent

3 points

QUESTION 33

1. Which of the following is typically considered the return on U.S. government bonds and bills and equals the real interest plus the expected inflation premium?

   	1.	required return
   	2.	market risk premium
   	3.	risk-free rate
   	4.	risk premium

2 points

QUESTION 34

1. Which of these is the line on a graph of return and risk (standard deviation) from the risk-free rate through the market portfolio?

   	1.	capital asset pricing line
   	2.	capital market line
   	3.	efficient market hypothesis
   	4.	efficient market line

2 points

QUESTION 35

1. Which of these is a theory that describes the types of information that are reflected in current stock prices?

   	1.	behavioral finance
   	2.	efficient market hypothesis
   	3.	asset pricing
   	4.	public information

2 points

QUESTION 36

1. The study of the cognitive processes and biases associated with making financial and economic decisions is known as

   	1.	efficient market hypothesis.
   	2.	stock market bubble.
   	3.	behavioral finance.
   	4.	asset pricing model.

2 points

QUESTION 37

1. Compute the expected return given these three economic states, their likelihoods, and the potential returns:

   Economic State	Probability			Return
   Fast Growth		0.1				50	%
   Slow Growth		0.6				8	%
   Recession		0.3				10	%

   	1.	6.8 percent
   	2.	12.8 percent
   	3.	22.7 percent
   	4.	16.0 percent

3 points

QUESTION 38

1. The annual return on the S&P 500 Index was 18.1 percent. The annual T-bill yield during the same period was 6.2 percent. What was the market risk premium during that year?

   	1.	6.2 percent
   	2.	24.3 percent
   	3.	18.1 percent
   	4.	11.9 percent

3 points

QUESTION 39

1. A company has a beta of 3.75. If the market return is expected to be 20 percent and the risk-free rate is 9.5 percent, what is the company's required return?

   	1.	48.875 percent
   	2.	33.250 percent
   	3.	55.625 percent
   	4.	39.375 percent

3 points

QUESTION 40

1. A company's current stock price is $84.50 and it is likely to pay a $3.50 dividend next year. Since analysts estimate the company will have a 10 percent growth rate, what is its expected return?

   	1.	4.26 percent
   	2.	4.14 percent
   	3.	10.00 percent
   	4.	14.14 percent