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EXAM 3 review with answers - Clicker Question 1 One year...

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Clicker Question 1 One year ago, Fredrick purchased 1,000 shares of XY stock for \$55,000. Today, he sold these shares for \$66 a share. What is Fredrick’s capital gains yield on this investment if the dividend yield is 3.6%? A. 3.6% B. 16.6% C. 20.0% CGY = (66 – 55) / 55 = .20 = 20% D. 23.6% E. 25.6%

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Clicker Question 2 Your portfolio provided you with the following returns: Year 1: 12% Year 2: -25% Year 3: 22% Year 4: 36% Calculate the geometric average return and standard deviation of returns. A. 8.7%; -24.5% B. 8.7%; 26.1% C. 8.7%; 32.5% D. 11.3%; 26.1% E. 11.3%; 32.5% GA = [(1.12)(.75)(.122)(1.36)] 1/4 – 1 = 1.0865 – 1 = .0866 = 8.7% STD DEV = 26.1 (calculator solution)
Clicker Question 3 Which security has the most total risk; which security has the most systematic risk? Security Standard Deviation Beta A 40% .5 B 30% 1.5 C 20% 1.0 A. A; A B. A; B Std dev = total risk; Beta = systematic risk C. B; C D. C; A E. B; B

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Clicker Question 4 (Chapter 11 Question 7) What is the expected return of the following: State Probability Return Recession 15% .02 Normal 55% .08 Boom 30% .13 A. 7.5% B. 8.0% C. 8.6% E(R)= (.15)(.02) + (.55)(.08) + (.30)(.13) = .086 = 8.6% D. 9.5% E. 10.4%
Clicker Question 5 (Chapter 11 Question 7)

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