chap5_exercise - C the rate of return to risk aversion D...

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Chapter 5 Selected Problems: From textbooks 1, P154 #4 2, P154 #5 3, P157 #19 Additional multiple choice questions: 1. The holding period return on a stock is equal to __________. A) the capital gain yield over the period plus the inflation rate B) the capital gain yield over the period plus the dividend yield C) the current yield plus the dividend yield D) the dividend yield plus the risk premium 2. The market risk premium is defined as ___________. A) the difference between the return on an index fund and the return on Treasury bills B) the difference between the return on a small firm mutual fund and the return on the Standard and Poor's 500 index C) the difference between the return on the risky asset with the lowest returns and the return on Treasury bills D) the difference between the return on the highest yielding asset and the lowest yielding asset.
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3. The excess return is _____. A) the rate of return that can be earned with certainty B) the rate of return in excess of the Treasury bill rate
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Unformatted text preview: C) the rate of return to risk aversion D) none of the above 4. The reward/variability ratio is given by __________. A) the slope of the capital allocation line B) the second derivative of the capital allocation line C) the point at which the second derivative of the investor's indifference curve reaches zero D) none of the above 5. Historical records regarding returns on stocks, Treasury bonds, and Treasury bills between 1926 and 1998 show that __________. A) stocks offered investors greater rates of return than bonds and bills B) stock returns were less volatile than those of bonds and bills C) bonds offered investors greater rates of return than stocks and bills D) bills outperformed stocks and bonds 6. If you are promised a nominal return of 12%, on a one year investment, and you expect the rate of inflation to be 3%, what real rate do you expect to earn? A) 5.48% B) 8.74% C) 9.00% D) 12.00%...
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chap5_exercise - C the rate of return to risk aversion D...

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