FIN 3300 Exam 1 with Accurate
Solutions
The total dollar return on a share of stock is defined as the: - ANSWER-capital gain or
loss plus any dividend income.
The dividend yield is defined as the annual dividend expressed as a percentage of the: -
ANSWER-initial stock price.
When the total return on an investment is expressed on a per-year basis it is called the:
- ANSWER-effective annual return.
The rate of return earned on a U.S. Treasury bill is frequently used as a proxy for the: -
ANSWER-risk-free rate
The risk premium is defined as the rate of return on: - ANSWER-a risky asset minus the
risk-free rate.
The standard deviation is a measure of: - ANSWER-volitility
A frequency distribution, which is completely defined by its average (mean) and
variance or standard deviation, is referred to as a(n): - ANSWER-normal distribution
The average compound return earned per year over a multi-year period is called the: -
ANSWER-geometric average return
The average compound return earned per year over a multi-year period when
investment inflows and outflows are considered is called the: - ANSWER-dollar
weighted average return
Stacey purchased 300 shares of Coulter Industries stock and held it for 3 months before
reselling it. What is the value of "m" when computing the annualized return on this
investment? - ANSWER-4.00
m=number of months/ number of months in a year
f you multiply the number of shares outstanding for a stock by the price per share, you
are computing the firm's: - ANSWER-market capitalization.
Which one of the following had the highest average return for the period 1926-2018? -
ANSWER-small-company stocks
, Which one of the following had the highest risk premium for the period 1926-2018? -
ANSWER-small-company stocks
Which one of the following had the narrowest bell curve for the period 1926-2018? -
ANSWER-U.S. Treasury bills
Which one of the following had the smallest standard deviation of returns for the period
1926-2018? - ANSWER-intermediate term government bonds
The mean plus or minus one standard deviation defines the ________ percent
probability range of a normal distribution. - ANSWER-68
Assume you own a portfolio that is invested 50 percent in large-company stocks and 50
percent in corporate bonds. If you want to increase the potential annual return on this
portfolio, you could: - ANSWER-increase the standard deviation of the portfolio.
The wider the distribution of an investment's returns over time, the ________ the
expected average rate of return and the ________ the expected volatility of those
returns. - ANSWER-higher; higher
One year ago, you purchased 200 shares of Southern Foods common stock for $39.50
a share. Today, you sold your shares for $35.40 a share. During this past year, the
stock paid $1.36 in dividends per share. What is your dividend yield on this investment?
- ANSWER-3.443%
dividend yield of investment= dividend received/ purchase price
Which one of the following prices will an individual investor receive if he or she sells
shares of Intel? - ANSWER-bid
The profit a dealer makes on a purchase and resale of shares of stock is called the: -
ANSWER-spread
A private equity fund: I. is set up as a limited partnership II. usually uses a 2/20 fee
structure III. places no constraints on manager compensation IV. typically has a stated
life of 7 to 10 years - ANSWER-I, II and IV only
An owner of a trading license on the NYSE is called a: - ANSWER-member
A trading floor broker: - ANSWER-executes customers' orders in exchange for a
commission.
You want to sell shares of stock at the current price. Which type of order should you
place? - ANSWER-market
Solutions
The total dollar return on a share of stock is defined as the: - ANSWER-capital gain or
loss plus any dividend income.
The dividend yield is defined as the annual dividend expressed as a percentage of the: -
ANSWER-initial stock price.
When the total return on an investment is expressed on a per-year basis it is called the:
- ANSWER-effective annual return.
The rate of return earned on a U.S. Treasury bill is frequently used as a proxy for the: -
ANSWER-risk-free rate
The risk premium is defined as the rate of return on: - ANSWER-a risky asset minus the
risk-free rate.
The standard deviation is a measure of: - ANSWER-volitility
A frequency distribution, which is completely defined by its average (mean) and
variance or standard deviation, is referred to as a(n): - ANSWER-normal distribution
The average compound return earned per year over a multi-year period is called the: -
ANSWER-geometric average return
The average compound return earned per year over a multi-year period when
investment inflows and outflows are considered is called the: - ANSWER-dollar
weighted average return
Stacey purchased 300 shares of Coulter Industries stock and held it for 3 months before
reselling it. What is the value of "m" when computing the annualized return on this
investment? - ANSWER-4.00
m=number of months/ number of months in a year
f you multiply the number of shares outstanding for a stock by the price per share, you
are computing the firm's: - ANSWER-market capitalization.
Which one of the following had the highest average return for the period 1926-2018? -
ANSWER-small-company stocks
, Which one of the following had the highest risk premium for the period 1926-2018? -
ANSWER-small-company stocks
Which one of the following had the narrowest bell curve for the period 1926-2018? -
ANSWER-U.S. Treasury bills
Which one of the following had the smallest standard deviation of returns for the period
1926-2018? - ANSWER-intermediate term government bonds
The mean plus or minus one standard deviation defines the ________ percent
probability range of a normal distribution. - ANSWER-68
Assume you own a portfolio that is invested 50 percent in large-company stocks and 50
percent in corporate bonds. If you want to increase the potential annual return on this
portfolio, you could: - ANSWER-increase the standard deviation of the portfolio.
The wider the distribution of an investment's returns over time, the ________ the
expected average rate of return and the ________ the expected volatility of those
returns. - ANSWER-higher; higher
One year ago, you purchased 200 shares of Southern Foods common stock for $39.50
a share. Today, you sold your shares for $35.40 a share. During this past year, the
stock paid $1.36 in dividends per share. What is your dividend yield on this investment?
- ANSWER-3.443%
dividend yield of investment= dividend received/ purchase price
Which one of the following prices will an individual investor receive if he or she sells
shares of Intel? - ANSWER-bid
The profit a dealer makes on a purchase and resale of shares of stock is called the: -
ANSWER-spread
A private equity fund: I. is set up as a limited partnership II. usually uses a 2/20 fee
structure III. places no constraints on manager compensation IV. typically has a stated
life of 7 to 10 years - ANSWER-I, II and IV only
An owner of a trading license on the NYSE is called a: - ANSWER-member
A trading floor broker: - ANSWER-executes customers' orders in exchange for a
commission.
You want to sell shares of stock at the current price. Which type of order should you
place? - ANSWER-market
