CH. 10 FINANCE – 501 EXAM QUESTIONS WITH
100% CORRECT ANSWERS
You have a sampling of returns for the Malta Stock Fund. The returns are 7.25 percent,
5.63 percent, 12.56 percent, and 1.08 percent. What is the mean and variance of this
sampling?
6.63 percent; .00225 - Reason: Average return = (.0725 + .0563 + .1256 + .0108)/4
Average return = .0663, or 6.63%
Var = [(.0725 − .0663)2 + (.0563 − .0663)2 + (.1256 − .0663)2 + (.0108 − .0663)2]/(4 − 1):
Var = .00225
You purchased 300 shares of stock at a price of $21.72 per share. Over the last year, you
have received total dividend income of $210. What is the dividend yield?
3.22 - Reason:
Dividend yield = ($210/300)/$21.72
Dividend yield = .0322, or 3.22%
Which one of the following is a correct statement concerning the excess return?
The greater the volatility of returns, the greater the expected excess return.
One year ago, you purchased a stock at a price of $32 a share. Today, you sold the stock
and realized a total return of 14.62 percent. Your capital gain was $3.48 a share. What was
your dividend yield on this stock?
3.75% - Reason:
Dividend yield = .1462 − ($3.48/$32)
Dividend yield = .0375, or 3.75%
A year ago, you purchased 300 shares of New Tech stock at a price of $49.03 per share. The
stock pays an annual dividend of $.10 per share. Today, you sold all your shares for $58.14
per share. What is your total dollar return on this investment?
$2,763 - Reason:
Total dollar return = ($58.14 − 49.03 + .10)(300)
Total dollar return = $2,763
One year ago, you purchased a stock at a price of $32.50. The stock pays quarterly
dividends of $.40 per share. Today, the stock is worth $34.60 per share. What is the total
dollar return per share to date from this investment?
$3.70 - Reason:
Total dollar return = $34.60 − 32.50 + $.40(4)
Total dollar return = $3.70
100% CORRECT ANSWERS
You have a sampling of returns for the Malta Stock Fund. The returns are 7.25 percent,
5.63 percent, 12.56 percent, and 1.08 percent. What is the mean and variance of this
sampling?
6.63 percent; .00225 - Reason: Average return = (.0725 + .0563 + .1256 + .0108)/4
Average return = .0663, or 6.63%
Var = [(.0725 − .0663)2 + (.0563 − .0663)2 + (.1256 − .0663)2 + (.0108 − .0663)2]/(4 − 1):
Var = .00225
You purchased 300 shares of stock at a price of $21.72 per share. Over the last year, you
have received total dividend income of $210. What is the dividend yield?
3.22 - Reason:
Dividend yield = ($210/300)/$21.72
Dividend yield = .0322, or 3.22%
Which one of the following is a correct statement concerning the excess return?
The greater the volatility of returns, the greater the expected excess return.
One year ago, you purchased a stock at a price of $32 a share. Today, you sold the stock
and realized a total return of 14.62 percent. Your capital gain was $3.48 a share. What was
your dividend yield on this stock?
3.75% - Reason:
Dividend yield = .1462 − ($3.48/$32)
Dividend yield = .0375, or 3.75%
A year ago, you purchased 300 shares of New Tech stock at a price of $49.03 per share. The
stock pays an annual dividend of $.10 per share. Today, you sold all your shares for $58.14
per share. What is your total dollar return on this investment?
$2,763 - Reason:
Total dollar return = ($58.14 − 49.03 + .10)(300)
Total dollar return = $2,763
One year ago, you purchased a stock at a price of $32.50. The stock pays quarterly
dividends of $.40 per share. Today, the stock is worth $34.60 per share. What is the total
dollar return per share to date from this investment?
$3.70 - Reason:
Total dollar return = $34.60 − 32.50 + $.40(4)
Total dollar return = $3.70
