Essay on Finance Exam

6873 Words Jun 3rd, 2013 28 Pages
ch12
Student: ___________________________________________________________________________

1.

Last year, T-bills returned 2 percent while your investment in large-company stocks earned an average of 5 percent. Which one of the following terms refers to the difference between these two rates of return? A. risk premium B. geometric return C. arithmetic D. standard deviation E. variance

2.

Which one of the following best defines the variance of an investment's annual returns over a number of years? A. The average squared difference between the arithmetic and the geometric average annual returns. B. The squared summation of the differences between the actual returns and the average geometric return. C. The average difference
…show more content…
D. The capital gains yield is expressed as a percentage of the sales price. E. The capital gains yield represents the total return earned by an investor. 13. Which of the following statements is correct in relation to a stock investment? I. The capital gains yield can be positive, negative, or zero. II. The dividend yield can be positive, negative, or zero. III. The total return can be positive, negative, or zero. IV. Neither the dividend yield nor the total return can be negative. A. I only B. I and II only C. I and III only D. I and IV only E. IV only

14. The real rate of return on a stock is approximately equal to the nominal rate of return: A. multiplied by (1 + inflation rate). B. plus the inflation rate. C. minus the inflation rate. D. divided by (1 + inflation rate). E. divided by (1 - inflation rate). 15. As long as the inflation rate is positive, the real rate of return on a security will be ____ the nominal rate of return. A. greater than B. equal to C. less than D. greater than or equal to E. unrelated to 16. Small-company stocks, as the term is used in the textbook, are best defined as the: A. 500 newest corporations in the U.S. B. firms whose stock trades OTC. C. smallest twenty percent of the firms listed on the NYSE. D. smallest twenty-five percent of the firms listed on NASDAQ. E. firms whose stock is listed on NASDAQ. 17. Which one of the following statements is a correct reflection of

Related Documents