6406 Final Exam Preparation Questions and solutions
Fin 6406, Final Exam
Preparation Questions and solutions Last Name, First Name:
Student ID#
Note that for most questions, there are no multiple choice answers, but the
actual final exam will have multiple choice answers. Approximately 40 similar
multiple choice questions from these 60 problems will be on the final exam.
Final Exam Instructions:
1. Do not remove your exam from the classroom
2. Write the Exam Number on your scantron and turn in the Exam and Scantron
3. Scantron without exams will receive a zero for the final exam grade
4. Exams without a Scantron will receive a zero for the final exam grade
5. Please place a Photo ID on your desk for me to check
6. Please place your formula sheet out for me to check
7. Choose the one alternative that is the best answer to each question/problem.
1. Calculate the average return on the market, and the standard deviation of the market returns using the
historical information below.
Year 1 2 3 4
S&P 500 1.50% 3.41% 5.50% 6.17%
a. Calculate the average return:
b. Calculate the variance =
(r r )
n
i 2
i1
n 1
W h ere :
n = th e n u m b e r o f o b s e rv a tio n s in th e d a ta s e t
r i = e a c h i n d i v i d u a l o b s e r v a t i o n , f o r e x a m p l e , e a c h i n d i v i d u a l r e tu r n
n
ri / n
r = th e e x p e c te d o r a v e ra g e re tu rn = i1
c. Then calculate the standard deviation as the square root of the variance: V a ria n ce
Or, on the Calculator:
1. Clear all
2. Enter each of the returns
1.5 ∑+
3.41 ∑+
5.50 ∑+
6.17 ∑+
3. shift sx, sy (which is below the 8 key) - this is the standard deviation.
4. shift x bar, y bar (which is below the 7 key) - this is the mean
Answers:
Standard deviation 2.119% or .02119; average return is approximately 4.2% or .042.
Page 1 of 28
,
,
Fin 6406, Final Exam
Preparation Questions and solutions Last Name, First Name:
Student ID#
Note that for most questions, there are no multiple choice answers, but the
actual final exam will have multiple choice answers. Approximately 40 similar
multiple choice questions from these 60 problems will be on the final exam.
Final Exam Instructions:
1. Do not remove your exam from the classroom
2. Write the Exam Number on your scantron and turn in the Exam and Scantron
3. Scantron without exams will receive a zero for the final exam grade
4. Exams without a Scantron will receive a zero for the final exam grade
5. Please place a Photo ID on your desk for me to check
6. Please place your formula sheet out for me to check
7. Choose the one alternative that is the best answer to each question/problem.
1. Calculate the average return on the market, and the standard deviation of the market returns using the
historical information below.
Year 1 2 3 4
S&P 500 1.50% 3.41% 5.50% 6.17%
a. Calculate the average return:
b. Calculate the variance =
(r r )
n
i 2
i1
n 1
W h ere :
n = th e n u m b e r o f o b s e rv a tio n s in th e d a ta s e t
r i = e a c h i n d i v i d u a l o b s e r v a t i o n , f o r e x a m p l e , e a c h i n d i v i d u a l r e tu r n
n
ri / n
r = th e e x p e c te d o r a v e ra g e re tu rn = i1
c. Then calculate the standard deviation as the square root of the variance: V a ria n ce
Or, on the Calculator:
1. Clear all
2. Enter each of the returns
1.5 ∑+
3.41 ∑+
5.50 ∑+
6.17 ∑+
3. shift sx, sy (which is below the 8 key) - this is the standard deviation.
4. shift x bar, y bar (which is below the 7 key) - this is the mean
Answers:
Standard deviation 2.119% or .02119; average return is approximately 4.2% or .042.
Page 1 of 28
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