Finance Questions

During the 2008 financial crisis, the Icelandic stock exchange temporarily halted trading. What was the reaction of that market when trading resumed a few days later?A) Increase in excess of 50 percentB) Increase between 25 and 50 percentC) Change between -25 and +25 percentD) Decrease between 25 and 50 percentE) Decrease in excess of 75 percent

Given a set of returns, the wider the distribution of those returns, theA) higher the number of those returns.B) lower the average rate of return.C) lower the variance.D) higher the standard deviation.E) lower the volatility.

Which one of these statements correctly reflects historical history for the period 1926-2015?A) Large-company stocks have never returned more than 40 percent in a single year.B) There is a direct relationship between the annual returns on large-company stocks and long-term government bonds.C) U.S. Treasury bills have had a positive rate of return every single year.D) The return on U.S. Treasury bills has exceeded the rate of inflation every single year.E) The rate of inflation as measured by the consumer price index has been positive every single year.

The variance of returns for a portfolio of stocks is computed by dividing the sum of theA) squared deviations by (the number of returns minus one).B) average returns by (the number of returns minus one).C) average returns by (the number of returns plus one).D) squared deviations by the average rate of return.E) squared deviations by (the number of returns plus one).

The risk premium is computed by ________ the average rate of return for an investment.A) subtracting the inflation rate fromB) adding the inflation rate toC) subtracting the average return on U.S. Treasury bills fromD) adding the average return on U.S. Treasury bills toE) subtracting the average return on long-term government bonds from

In 2008, the S&P 500 index had an annual decline ofA) 68 percent.B) 24 percent.C) 46 percent.D) 57 percent.E) 37 percent.

You are comparing the returns of two portfolios for a 10-year period. Portfolio I has a lower dispersion of returns and a higher average rate of return than Portfolio II. Given this, what do you know with certainty?A) Portfolio I has a lower standard deviation than Portfolio II.B) Portfolio I is riskier than Portfolio II.C) Portfolio II has less total risk than Portfolio I.D) Portfolio I will outperform Portfolio II over the next 10 years.E) Portfolio II consists of more individual stocks than Portfolio I.

One year ago, Barkley's stock sold for $28 a share. During last year, Barkley's paid $1.23 per share in dividends and saw its stock price increase by 7 percent for the year. Today, the firm announced that it will pay $1.30 per share in dividends this year. What do you know with certainty about the performance of Barkley's stock for this year?A) The total rate of return will be higher this year than it was last year.B) The dividend yield for this year will be higher than it was last year.C) The capital gains yield will be positive.D) The dividend yield for this year will be lower than it was last year.E) The total rate of return will be lower this year than it was last year.

As of 2015, the United States represents about ________ percent of the total world stock market capitalization.A) 53B) 67C) 27D) 38E) 19

In 2008, the S&P 500 indexA) declined in value every month.B) declined almost 17 percent in 1 month.C) increased in value during 2 months.D) never increased by more than 2 percent in any 1 month.E) increased in value during the first 3 months.

How is the Sharpe ratio defined as it applies to security returns?A) Average return / Risk premiumB) Standard deviation / Risk premiumC) Average return / Standard deviationD) Risk premium / Average returnE) Risk premium / Standard deviation

Given a normal distribution, assume you want to earn a rate of return that plots more than three standard deviations above the mean. What is your probability of earning such a return in any one year?A) .14 percent or lessB) .15 to .25 percentC) .26 to .50 percentD) .51 to 1 percentE) More than 1 percent

How did long-term U.S. Treasury bonds perform in 2008?A) Decreased by more than 15 percentB) Decreased between 5 and 15 percentC) Changed between -5 and +5 percentD) Increased between 5 and 15 percentE) Increased more than 15 percent

The histogram of the returns on large-company stocks for the period 1926 to 2015 shows that the largest number of years had annual returns ofA) 0 to 10 percent.B) 10 to 20 percent.C) 20 to 30 percent.D) 30 to 40 percent.E) -10 to 0 percent.

If you examine the U.S. stock market risk premium by extending the 1926 to 2015 time period backwards in time to 1802 (given the available information), the risk premiumA) decreases to 5.2 percent.B) increases to 7.6 percent.C) decreases to 3.9 percent.D) increases to 7.1 percent.E) decreases to 6.3 percent.

What conclusion should you draw from the performance of stocks and bonds over the period 1926 to 2015?A) Bonds have greater volatility than stocks.B) Stock returns have a lower standard deviation than bond returns.C) In any year, stocks will outperform bonds.D) Stock returns have a smaller risk premium than bond returns.E) Stocks are riskier than bonds.

Based on historical performance from 1900-2010, the U.S.equity risk premium was approximatelyA) 6.1 percent.B) 5.4 percent.C) 7.2 percent.D) 9.0 percent.E) 8.3 percent.

A symmetric, bell-shaped frequency distribution that is completely defined by its mean and standard deviation is the ________ distribution.A) gammaB) PoissonC) bimodalD) normalE) uniform

Which one of these countries had the highest average stock market risk premium for the period 1900 to 2010?A) United StatesB) United KingdomC) ItalyD) SwedenE) Denmark

The average squared difference between the actual return and the average return is called theA) excess return.B) variance.C) standard deviation.D) risk premium.E) volatility return.