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Chapter 12 Some Lessons from Capital Market History
Chapter 12 Quiz A
Student Name _________________________
Student ID ____________
________ 1.
Over the period 19262005, smallcompany 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 19262005, intermediateterm 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 intermediateterm 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 largecompany stocks exceeded the standard deviation of the
returns on smallcompany stocks for the period 19262005.
b.For the period of 19262005, 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 19262005.
d. The frequency distribution of the returns on largecompany stocks is wider than the frequency distribution
of the returns on longterm corporate bonds for the period
19262005.
________ 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 25year 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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 Spring '10
 Mohdhassan
 Finance

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