Multiple Choice Questions
1. The total dollar return on a share of stock is defined as the:
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.
LEVEL OF DIFFICULTY: CORE
Learning Objective: 1-1
SECTION: 1.1
TOPIC: TOTAL DOLLAR RETURN
2. The dividend yield is defined as the annual dividend expressed as a percentage of the:
A. average stock price.
B. initial stock price.
C. ending stock price.
D. total annual return.
E. capital gain.
LEVEL OF DIFFICULTY: CORE
Learning Objective: 1-1
SECTION: 1.1
TOPIC: DIVIDEND YIELD
,3. The capital gains yield is equal to:
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.
LEVEL OF DIFFICULTY: CORE
Learning Objective: 1-1
SECTION: 1.1
TOPIC: CAPITAL GAINS YIELD
,4. When the total return on an investment is expressed on a per-year basis it is called the:
A. capital gains yield.
B. dividend yield.
C. holding period return.
D. effective annual return.
E. initial return.
LEVEL OF DIFFICULTY: CORE
Learning Objective: 1-1
SECTION: 1.1
TOPIC: EFFECTIVE ANNUAL RETURN
5. The risk-free rate is:
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.
LEVEL OF DIFFICULTY: CORE
Learning Objective: 1-1
SECTION: 1.3
TOPIC: RISK-FREE RATE
6. The rate of return earned on a U.S. Treasury bill is referred to as the:
A. risk premium.
B. deflated rate of return.
C. risk-free rate.
D. expected rate of return.
E. market rate of return.
LEVEL OF DIFFICULTY: CORE
Learning Objective: 1-1
SECTION: 1.3
TOPIC: RISK-FREE RATE
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1. The total dollar return on a share of stock is defined as the:
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.
LEVEL OF DIFFICULTY: CORE
Learning Objective: 1-1
SECTION: 1.1
TOPIC: TOTAL DOLLAR RETURN
2. The dividend yield is defined as the annual dividend expressed as a percentage of the:
A. average stock price.
B. initial stock price.
C. ending stock price.
D. total annual return.
E. capital gain.
LEVEL OF DIFFICULTY: CORE
Learning Objective: 1-1
SECTION: 1.1
TOPIC: DIVIDEND YIELD
,3. The capital gains yield is equal to:
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.
LEVEL OF DIFFICULTY: CORE
Learning Objective: 1-1
SECTION: 1.1
TOPIC: CAPITAL GAINS YIELD
,4. When the total return on an investment is expressed on a per-year basis it is called the:
A. capital gains yield.
B. dividend yield.
C. holding period return.
D. effective annual return.
E. initial return.
LEVEL OF DIFFICULTY: CORE
Learning Objective: 1-1
SECTION: 1.1
TOPIC: EFFECTIVE ANNUAL RETURN
5. The risk-free rate is:
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.
LEVEL OF DIFFICULTY: CORE
Learning Objective: 1-1
SECTION: 1.3
TOPIC: RISK-FREE RATE
6. The rate of return earned on a U.S. Treasury bill is referred to as the:
A. risk premium.
B. deflated rate of return.
C. risk-free rate.
D. expected rate of return.
E. market rate of return.
LEVEL OF DIFFICULTY: CORE
Learning Objective: 1-1
SECTION: 1.3
TOPIC: RISK-FREE RATE
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