CorporatexFinance,x12ex (Ross)
Chapterx 10x Lessonsx fromx Marketx History
1) Alphax Industriesx stockx soldx forx$39x axsharex atx thexbeginningx of xthex year.xDuringx thex year,xthex c
ompanyx paid x ax dividendx ofx$3x axsharex andx thenx endedxthexyearx withx axstockxpricex of x$37.x Thex cha
ngex inx thex stockx pricex isx best x described x asx a:
A) capitalxgain.
B) positivextotalx dollarx return.
C) capitalxloss.
D) negativextotalx dollarx return.
E) negativexdividend xyield.
Answer:x Cx Difficul
ty:x1xEasy
Section:x 10.1xReturnsx
Topic:x Totalx returnx Bl
oom's:x Remember
AACSB:x Reflectivex Thinkingx Accessi
bility:x Keyboard xNavigation
2) Thex capitalx gainsx yield x plusx thex dividend x yield x onx ax securityx isx called x the:
A) variancex of x returns.
B) geometricxreturn.
C) averagexperiod xreturn.
D) current xyield.
E) totalx return.
Answer:x Ex Difficult
y:x1xEasy
Section:x 10.1xReturnsx
Topic:x Totalx returnx Bl
oom's:x Remember
AACSB:x Reflectivex Thinkingx Accessi
bility:x Keyboard xNavigation
1
Copyright x ©x 2019 x McGraw-Hillx Education.x Allx rightsx reserved.
No x reproduction x orxdistribution x without xthexpriorx written x consent x of x McGraw-Hillx Education.
,3) A x portfoliox of x small-
companyx commonx stocks,x asx used x inx thisx course,x isx best xdescribed xasx thex stocksx of x thex firmsx whic
h:
A) represent x thex smallest x twentyx percent x of x thex companiesx listed x onx thex NYSE.
B) havex gonex publicx withinx thex past x fivex years.
C) arex toox smallx tox bex listed x onx thex NYSE.
D) arex included x inx thex S&Px 500x index.
E) tradex publiclyx forx $5x ax sharex orx less.
Answer:x Ax Difficul
ty:x1xEasy
Section:x 10.2xHoldingxPeriod xReturnsxT
opic:x Asset x classes
Bloom's:x Rememberx AACSB
:x ReflectivexThinking
Accessibility:x Keyboard xNavigation
4) Based x onx thex period x of x 1926x throughx 2017,x
havextended xtoxoutperformxotherx securitiesx overx thex long-term.
A) U.S.xTreasuryx bills
B) large-companyx stocks
C) long-termxcorporatexbonds
D) small-companyx stocks
E) long-termxgovernment xbonds
Answer:x Dx Difficul
ty:x1xEasy
Section:x 10.2xHoldingxPeriod xReturnsxT
opic:x Historicalx performancex Bloom's:x
Understand
AACSB:x Reflectivex Thinkingx Accessi
bility:x Keyboard xNavigation
5) Based x onx thexperiod xofx 1926xthroughx 2017,xU.S.xTreasuryx billsx havex produced xannualx ratesx of x r
eturnx that:
A) ranged x fromx −1x percent x tox +15x percent.
B) ranged x fromx −1x percent x tox +5x percent.
C) werex negativex onlyx duringx thex Great x Depression.
D) havex alwaysx beenx positive.
E) neverx exceeded x 6x percent.
Answer:x Dx Difficul
ty:x1xEasy
Section:x 10.2xHoldingxPeriod xReturnsxT
opic:x Historicalx performancex Bloom's:x
Understand
AACSB:x ReflectivexThinking
2
Copyright x ©x 2019 x McGraw-Hillx Education.x Allx rightsx reserved.
No x reproduction x orxdistribution x without xthexpriorx written x consent x of x McGraw-Hillx Education.
,Accessibility:x Keyboard xNavigation
6) Anotherx termx that x refersx tox thex averagex ratex of x returnx isx the:
A) variance.
B) standard xdeviation.
C) realx return.
D) mean.
E) histogram.
Answer:x Dx Difficul
ty:x1xEasy
Section:x 10.3xReturnxStatisticsx
Topic:x Portfoliox returnx Bloom's
:x Remember
AACSB:x Reflectivex Thinkingx Accessi
bility:x Keyboard xNavigation
7) Whichx onex of x thexfollowingx typesx ofxsecuritiesx hasx tendedxtoxproducex thexlowest xrealx ratex of x r
eturnx forx thex period x 1926x throughx 2017?
A) U.S.xTreasuryx bills
B) Long-termxgovernment xbonds
C) Small-companyx stocks
D) Large-companyx stocks
E) Long-termxcorporatexbonds
Answer:x Ax Difficul
ty:x1xEasy
Section:x 10.4x Averagex Stockx Returnsx and x Risk-
Freex Returnsx Topic:x Historicalx performance
Bloom's:x Rememberx AACSB
:x ReflectivexThinking
Accessibility:x Keyboard xNavigation
3
Copyright x ©x 2019 x McGraw-Hillx Education.x Allx rightsx reserved.
No x reproduction x orxdistribution x without xthexpriorx written x consent x of x McGraw-Hillx Education.
, 8) Onx average,x forx thex period x 1926x throughx 2017:
A) thex realx ratex of x returnx onx U.S.x Treasuryx billsx hasx beenx negative.
B) small-companyxstocksxhavexunderperformed xlarge-companyxstocks.
C) long-termxgovernment xbondsxhavexproduced xhigherxreturnsxthanxlong-termxcorporatexbonds.
D) thex excessx returnx onx long-termx corporatex bondsx hasx exceeded x thex excessx returnx onx long-
termx government x bonds.
E) thex excessx returnx onx large-companyx stocksx hasx exceeded x thex excessx returnx onx small-
companyx stocks.
Answer:x Dx Difficul
ty:x1xEasy
Section:x 10.4x Averagex Stockx Returnsx and x Risk-
Freex Returnsx Topic:x Historicalx performance
Bloom's:x Understand x AACSB
:x ReflectivexThinking
Accessibility:x Keyboard xNavigation
9) Overx thex period x of x 1926x throughx 2017,x thex annualx ratex of x returnx onx
hasxbeenxmorex volatilex thanx thex annualx ratex of x returnx onx .
A) large-companyxstocks;xsmall-companyxstocks
B) U.S.xTreasuryxbills;xsmall-companyxstocks
C) U.S.xTreasuryxbills;xlong-termxgovernment xbonds
D) long-termxcorporatexbonds;xsmall-companyxstocks
E) large-companyxstocks;xlong-termxcorporatexbonds
Answer:x Ex Difficult
y:x1xEasy
Section:x 10.4x Averagex Stockx Returnsx and x Risk-
Freex Returnsx Topic:x Historicalx performance
Bloom's:x Understand x AACSB
:x ReflectivexThinking
Accessibility:x Keyboard xNavigation
4
Copyright x ©x 2019 x McGraw-Hillx Education.x Allx rightsx reserved.
No x reproduction x orxdistribution x without xthexpriorx written x consent x of x McGraw-Hillx Education.
Chapterx 10x Lessonsx fromx Marketx History
1) Alphax Industriesx stockx soldx forx$39x axsharex atx thexbeginningx of xthex year.xDuringx thex year,xthex c
ompanyx paid x ax dividendx ofx$3x axsharex andx thenx endedxthexyearx withx axstockxpricex of x$37.x Thex cha
ngex inx thex stockx pricex isx best x described x asx a:
A) capitalxgain.
B) positivextotalx dollarx return.
C) capitalxloss.
D) negativextotalx dollarx return.
E) negativexdividend xyield.
Answer:x Cx Difficul
ty:x1xEasy
Section:x 10.1xReturnsx
Topic:x Totalx returnx Bl
oom's:x Remember
AACSB:x Reflectivex Thinkingx Accessi
bility:x Keyboard xNavigation
2) Thex capitalx gainsx yield x plusx thex dividend x yield x onx ax securityx isx called x the:
A) variancex of x returns.
B) geometricxreturn.
C) averagexperiod xreturn.
D) current xyield.
E) totalx return.
Answer:x Ex Difficult
y:x1xEasy
Section:x 10.1xReturnsx
Topic:x Totalx returnx Bl
oom's:x Remember
AACSB:x Reflectivex Thinkingx Accessi
bility:x Keyboard xNavigation
1
Copyright x ©x 2019 x McGraw-Hillx Education.x Allx rightsx reserved.
No x reproduction x orxdistribution x without xthexpriorx written x consent x of x McGraw-Hillx Education.
,3) A x portfoliox of x small-
companyx commonx stocks,x asx used x inx thisx course,x isx best xdescribed xasx thex stocksx of x thex firmsx whic
h:
A) represent x thex smallest x twentyx percent x of x thex companiesx listed x onx thex NYSE.
B) havex gonex publicx withinx thex past x fivex years.
C) arex toox smallx tox bex listed x onx thex NYSE.
D) arex included x inx thex S&Px 500x index.
E) tradex publiclyx forx $5x ax sharex orx less.
Answer:x Ax Difficul
ty:x1xEasy
Section:x 10.2xHoldingxPeriod xReturnsxT
opic:x Asset x classes
Bloom's:x Rememberx AACSB
:x ReflectivexThinking
Accessibility:x Keyboard xNavigation
4) Based x onx thex period x of x 1926x throughx 2017,x
havextended xtoxoutperformxotherx securitiesx overx thex long-term.
A) U.S.xTreasuryx bills
B) large-companyx stocks
C) long-termxcorporatexbonds
D) small-companyx stocks
E) long-termxgovernment xbonds
Answer:x Dx Difficul
ty:x1xEasy
Section:x 10.2xHoldingxPeriod xReturnsxT
opic:x Historicalx performancex Bloom's:x
Understand
AACSB:x Reflectivex Thinkingx Accessi
bility:x Keyboard xNavigation
5) Based x onx thexperiod xofx 1926xthroughx 2017,xU.S.xTreasuryx billsx havex produced xannualx ratesx of x r
eturnx that:
A) ranged x fromx −1x percent x tox +15x percent.
B) ranged x fromx −1x percent x tox +5x percent.
C) werex negativex onlyx duringx thex Great x Depression.
D) havex alwaysx beenx positive.
E) neverx exceeded x 6x percent.
Answer:x Dx Difficul
ty:x1xEasy
Section:x 10.2xHoldingxPeriod xReturnsxT
opic:x Historicalx performancex Bloom's:x
Understand
AACSB:x ReflectivexThinking
2
Copyright x ©x 2019 x McGraw-Hillx Education.x Allx rightsx reserved.
No x reproduction x orxdistribution x without xthexpriorx written x consent x of x McGraw-Hillx Education.
,Accessibility:x Keyboard xNavigation
6) Anotherx termx that x refersx tox thex averagex ratex of x returnx isx the:
A) variance.
B) standard xdeviation.
C) realx return.
D) mean.
E) histogram.
Answer:x Dx Difficul
ty:x1xEasy
Section:x 10.3xReturnxStatisticsx
Topic:x Portfoliox returnx Bloom's
:x Remember
AACSB:x Reflectivex Thinkingx Accessi
bility:x Keyboard xNavigation
7) Whichx onex of x thexfollowingx typesx ofxsecuritiesx hasx tendedxtoxproducex thexlowest xrealx ratex of x r
eturnx forx thex period x 1926x throughx 2017?
A) U.S.xTreasuryx bills
B) Long-termxgovernment xbonds
C) Small-companyx stocks
D) Large-companyx stocks
E) Long-termxcorporatexbonds
Answer:x Ax Difficul
ty:x1xEasy
Section:x 10.4x Averagex Stockx Returnsx and x Risk-
Freex Returnsx Topic:x Historicalx performance
Bloom's:x Rememberx AACSB
:x ReflectivexThinking
Accessibility:x Keyboard xNavigation
3
Copyright x ©x 2019 x McGraw-Hillx Education.x Allx rightsx reserved.
No x reproduction x orxdistribution x without xthexpriorx written x consent x of x McGraw-Hillx Education.
, 8) Onx average,x forx thex period x 1926x throughx 2017:
A) thex realx ratex of x returnx onx U.S.x Treasuryx billsx hasx beenx negative.
B) small-companyxstocksxhavexunderperformed xlarge-companyxstocks.
C) long-termxgovernment xbondsxhavexproduced xhigherxreturnsxthanxlong-termxcorporatexbonds.
D) thex excessx returnx onx long-termx corporatex bondsx hasx exceeded x thex excessx returnx onx long-
termx government x bonds.
E) thex excessx returnx onx large-companyx stocksx hasx exceeded x thex excessx returnx onx small-
companyx stocks.
Answer:x Dx Difficul
ty:x1xEasy
Section:x 10.4x Averagex Stockx Returnsx and x Risk-
Freex Returnsx Topic:x Historicalx performance
Bloom's:x Understand x AACSB
:x ReflectivexThinking
Accessibility:x Keyboard xNavigation
9) Overx thex period x of x 1926x throughx 2017,x thex annualx ratex of x returnx onx
hasxbeenxmorex volatilex thanx thex annualx ratex of x returnx onx .
A) large-companyxstocks;xsmall-companyxstocks
B) U.S.xTreasuryxbills;xsmall-companyxstocks
C) U.S.xTreasuryxbills;xlong-termxgovernment xbonds
D) long-termxcorporatexbonds;xsmall-companyxstocks
E) large-companyxstocks;xlong-termxcorporatexbonds
Answer:x Ex Difficult
y:x1xEasy
Section:x 10.4x Averagex Stockx Returnsx and x Risk-
Freex Returnsx Topic:x Historicalx performance
Bloom's:x Understand x AACSB
:x ReflectivexThinking
Accessibility:x Keyboard xNavigation
4
Copyright x ©x 2019 x McGraw-Hillx Education.x Allx rightsx reserved.
No x reproduction x orxdistribution x without xthexpriorx written x consent x of x McGraw-Hillx Education.
