Question

We have the following information on the shares 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

$1.50

2

$25

$1.50

3

$22

$1.50

4

$30

$1.60

5

$32

$1.60

Select one:

a.$12; 60%

b.$19.7; 61.6%

c.$19.7; 98.5%

d.$12; 38.5%

e.$3.94; 15.3%

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

Year

Share price

1

$22

2

$26

3

$30

4

$28

5

$25

Select one:

a.13.64%

b.4.05%

c.3.24%

d.5.36%

e.32.75%

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Given the following share price and Consumer Price Index history, what is the average real return per share?

Year

Share price

Consumer Price Index

1

$35

100

2

$30

102

3

$39

104

4

$42

106

5

$45

108

Select one:

a.12.59%

b.4.49%

c.3.55%

d.5.16%

e.5.59%

We know that during the last 10 years, the average historical return on a market index is 12%. We also know that the average inflation rate and average risk-free rate over the last 10 years are 2% and 5%, respectively. What is the real risk premium using the exact Fisher equation?

Select one:

a.2.94%

b.6.86%

c.7.00%

d.9.80%

e.10.00%

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

Year

Share price

1

$35

2

$30

3

$39

4

$42

5

$45

Select one:

a.0.18%

b.5.89%

c.18.08%

d.3.27%

e.1.81%

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Which of the following lessons can be learned from studying the history of individual asset returns in the capital market?

Select one:

a.Return and risk expectations can and will materialize over time if we wait long enough.

b.There are rewards, in terms of higher risk premiums, for holding risky assets.

c.Arithmetic and geometric average returns would be the same in an efficient financial market.

d.Unsystematic risk is the risk that is important to the average investor.

e.Excess returns on mutual funds cannot beat excess returns on index funds.

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

Year

Share price

1

$35

2

$30

3

$39

4

$42

5

$45

Select one:

a.7.95%

b.7.64%

c.7.14%

d.6.84%

e.6.48%

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The statement "all information, including 'insider information,' are already priced in the market" describes a _____________ market.

Select one:

a.weak-form efficient

b.strong-form efficient

c.semi-strong-form efficient

d.stock

e.bond

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The average historical annual return on a stock is 7.16%, with a standard deviation of 44.35%. What is the 97.5% annual value-at-risk (VaR) on a $1 million investment in this stock?

Select one:

a.-$371,900

b.-$443,000

c.-$815,400

d.-$975,000

e.-$1,000,000

Research into the performance of mutual funds showed that fund managers have not been able to beat the returns on index funds. This is lends credence to

Select one:

a.the argument for market diversification.

b.the argument for centralized regulation of the financial market.

c.semi-strong form market efficiency.

d.strong form market efficiency.

e.the non-existence of market anomalies.