A Brief History Of Risk And Return

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Question 1
Free
Multiple Choice

The total dollar return on a share of stock is defined as the:

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A

change in the price of the stock over a period of time.

B

dividend income divided by the beginning price per share.

C

capital gain or loss plus any dividend income.

D

change in the stock price divided by the original stock price.

E

annual dividend income received.

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Question 2
Free
Multiple Choice

The dividend yield is defined as the annual dividend expressed as a percentage of the:

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A

average stock price.

B

initial stock price.

C

ending stock price.

D

total annual return.

E

capital gain.

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Question 3
Free
Multiple Choice

The capital gains yield is equal to:

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A

(Pt - Pt + 1 + Dt + 1)/Pt + 1.

B

(Pt + 1 - Pt + Dt)/Pt.

C

Dt + 1/Pt.

D

(Pt + 1 - Pt)/Pt.

E

(Pt + 1 - Pt)/Pt + 1.

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Question 4
Free
Multiple Choice

When the total return on an investment is expressed on a per-year basis it is called the:

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A

capital gains yield.

B

dividend yield.

C

holding period return.

D

effective annual return.

E

initial return.

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Question 5
Free
Multiple Choice

The risk-free rate is:

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A

another term for the dividend yield.

B

defined as the increase in the value of a share of stock over time.

C

the rate of return earned on an investment in a firm that you personally own.

D

defined as the total of the capital gains yield plus the dividend yield.

E

the rate of return on a riskless investment.

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Question 6
Multiple Choice

The rate of return earned on a U.S.Treasury bill is frequently used as a proxy for the:

Choose correct answer/s
A
risk premium.
B
deflated rate of return.
C
risk-free rate.
D
expected rate of return.
E
market rate of return.
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Question 7
Multiple Choice

The risk premium is defined as the rate of return on:

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A
a risky asset minus the risk-free rate.
B
the overall market.
C
a U.S. Treasury bill.
D
a risky asset minus the inflation rate.
E
a riskless investment.
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Question 8
Multiple Choice

The additional return earned for accepting risk is called the:

Choose correct answer/s
A
inflated return.
B
capital gains yield.
C
real return.
D
riskless rate.
E
risk premium.
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Question 9
Multiple Choice

The standard deviation is a measure of:

Choose correct answer/s
A
volatility.
B
total return.
C
capital gains.
D
changes in dividend yields.
E
changes in the capital gains rate.
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Question 10
Multiple Choice

A frequency distribution,which is completely defined by its average (mean)and standard deviation,is referred to as a(n):

Choose correct answer/s
A
normal distribution.
B
variance distribution.
C
expected rate of return.
D
average geometric return.
E
average arithmetic return.
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Question 11
Multiple Choice

The arithmetic average return is the:

Choose correct answer/s
A
summation of the returns for a number of years, t, divided by (t - 1).
B
compound total return for a period of years, t, divided by t.
C
average compound return earned per year over a multi-year period.
D
average squared return earned in a single year.
E
return earned in an average year over a multi-year period.
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Question 12
Multiple Choice

The average compound return earned per year over a multi-year period is called the:

Choose correct answer/s
A
total return
B
average capital gains yield
C
variance
D
arithmetic average return
E
geometric average return
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Question 13
Multiple Choice

The average compound return earned per year over a multi-year period when inflows and outflows are considered is called the:

Choose correct answer/s
A
total return.
B
average capital gains yield.
C
dollar-weighted average return.
D
arithmetic average return.
E
geometric average return.
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Question 14
Multiple Choice

Which one of the following statements is correct concerning the dividend yield and the total return?

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A
The dividend yield can be zero while the total return must be a positive value.
B
The total return can be negative but the dividend yield cannot be negative.
C
The total return must be greater than the dividend yield.
D
The total return plus the capital gains yield is equal to the dividend yield.
E
The dividend yield exceeds the total return when a stock increases in value.
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Question 15
Multiple Choice

An annualized return:

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A
is less than a holding period return when the holding period is less than one year.
B
is expressed as the summation of the capital gains yield and the dividend yield on an investment.
C
is expressed as the capital gains yield that would have been realized if an investment had been held for a twelve-month period.
D
is computed as (1 + holding period percentage return)m, where m is the number of holding periods in a year.
E
is computed as (1 + holding period percentage return)m, where m is the number of months in the holding period.
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Question 16
Multiple Choice

Stacey purchased 300 shares of Coulter Industries stock and held it for 4 months before reselling it.What is the value of "m" when computing the annualized return on this investment?

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A
.25
B
.33
C
.40
D
3.00
E
4.00
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Question 17
Multiple Choice

Capital gains are included in the return on an investment:

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A
when either the investment is sold or the investment has been owned for at least one year.
B
only if the investment is sold and the capital gain is realized.
C
whenever dividends are paid.
D
whether or not the investment is sold.
E
only if the investment incurs a loss in value or is sold.
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Question 18
Multiple Choice

When we refer to the rate of return on an investment,we are generally referring to the:

Choose correct answer/s
A
capital gains yield.
B
effective annual rate of return.
C
total percentage return.
D
dividend yield.
E
annualized dividend yield.
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Question 19
Multiple Choice

Which one of the following should be used to compare the overall performance of three different investments?

Choose correct answer/s
A
holding period dollar return
B
capital gains yield
C
dividend yield
D
holding period percentage return
E
effective annual return
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Question 20
Multiple Choice

If you multiply the number of shares of outstanding stock for a firm by the price per share,you are computing the firm's:

Choose correct answer/s
A
equity ratio.
B
total book value.
C
market share.
D
market capitalization.
E
time value.
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