fmt12 - Chapter 12 Some Lessons from Capital Market History...

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Chapter 12 Some Lessons from Capital Market History Chapter 12 Quiz A Student Name _________________________ Student ID ____________ ________ 1. Over the period 1926-2005, small-company stocks produced an average annual return of 17.4 percent with a standard deviation of 32.9 percent. Based on this information, what is the range of returns an investor can expect to earn in any one year given a 95 percent probability range? a. -48.4 to 83.2 percent b. -32.9 to 67.7 percent c. -15.5 to 67.7 percent d. -1.9 to 50.3 percent ________ 2. Over the period 1926-2005, intermediate-term government bonds had an average annual return of 5.5 percent, U.S. Treasury bills returned 3.8 percent, and inflation averaged 3.1 percent. What was the average risk premium on intermediate-term government bonds for this time period? a. .07 percent b. 1.7 percent c. 2.4 percent d. 5.5 percent ________ 3. Which one of the following statements is correct? a. The standard deviation of the returns on large-company stocks exceeded the standard deviation of the returns on small-company stocks for the period 1926-2005. b.For the period of 1926-2005, the average annual rate of inflation exceeded the average annual return on U.S. Treasury bills. c. The standard deviation of the returns on U.S. Treasury bills was zero percent for the period 1926-2005. d. The frequency distribution of the returns on large-company stocks is wider than the frequency distribution of the returns on long-term corporate bonds for the period 1926-2005. ________ 4. Which one of the following best describes the information reflected in market prices if the financial markets are semistrong form efficient? a. only historical price information b. all private information c. all public information d. all information of any kind ________ 5. Over a 25-year period, a security had an arithmetic average return of 9.8 percent and a geometric average return of 8.7 percent. Based on Blume’s formula, what is the projected average rate of return on this security for the next 5 years? a. 8.27 percent b. 8.53 percent c. 8.88 percent d. 9.62 percent ________ 6. One year ago, you purchased a stock at a price of $36.24 a share. You received an annual dividend of $1.80 a share and sold the stock today for $32.12 a share. What was your capital gains rate of return? a. -11.28 percent b. -11.37 percent c. -12.76 percent d. -12.83 percent ________ 7. You purchased 100 shares of Resorts, Inc. stock at a price of $35.87 a share exactly one year ago. You have received dividends totaling $1.05 a share. Today, you sold your shares at a price of $46.26 a share. What is your total dollar return on this investment? a. $10.39 b. $11.44 c. $1,039 d. $1,144 ________ 8. A stock has produced annual returns of 11 percent, 15 percent, -6 percent, and 4 percent over the past four years, respectively. What is the 95 percent probability range of returns? a. -25.9 to 37.9 percent
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fmt12 - Chapter 12 Some Lessons from Capital Market History...

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