Finance Questions

What lesson can be learned from the 2008 market decline?A) Stocks and bonds react similarly in downward markets.B) Diversification lowers risk.C) Market declines cause high inflation rates.D) Global markets all react exactly the same.E) Equity risk premiums will decline in the future.

The higher the Sharpe ratio, theA) greater the total risk.B) greater the return per unit of risk.C) more the security resembles the overall market.D) greater the risk per unit of return.E) lower the level of total risk.

The return earned in a typical year over a multiyear period is called the ________ average return.A) arithmeticB) standardC) variantD) geometricE) real

Which one of these statements correctly reflects historical history for the period 1926-2015?A) U.S. Treasury bills had a negative rate of return during the Great Depression.B) The rate of return in any given year is a good estimate of the rate of return for the following year.C) For large-company stocks, both the worst and best annual rate of return occurred during the period 1930-35.D) The annual rate of return on U.S. Treasury bills never exceeded 8 percent.E) The maximum annual rate of return on large-company stocks was 33 percent.

For the period 1926 to 2015, large-company stocks had a standard deviation ofA) 20 percent.B) 6 percent.C) 13 percent.D) 27 percent.E) 10 percent.

The histograms of the returns on large-company and small-company stocks for the period 1926 to 2015 show thatA) large-company stocks never lost more than 20 percent in any one year.B) 1945 was the best-performing year for both large-company and small-company stocks.C) small-company stocks most commonly return 30 to 40 percent.D) small-company stocks are more volatile than large-company stocks.E) large-company stocks are riskier than small-company stocks.

For the period 1926 to 2015, the mean return on large-company stocks isA) 8.7 percent.B) 11.9 percent.C) 13.2 percent.D) 9.6 percent.E) 14.1 percent.

During the period 2000 to 2015, which one of the following years had the lowest rate of return for the S&P 500 Index?A) 2002B) 2008C) 2001D) 2009E) 2010

Past performanceA) does not guarantee future performance.B) is totally unrelated to future performance.C) guarantees future performance.D) is a perfect representation of future performance for the same length of time.E) will be duplicated in the near future.

Which one of the following types of securities has tended to produce the lowest real rate of return for the period 1926 to 2015?A) Long-term corporate bondsB) Long-term government bondsC) Small-company stocksD) Large-company stocksE) U.S. Treasury bills

The excess return you earn by moving from a relatively risk-free investment to a risky investment is called theA) geometric average return.B) inflation premium.C) risk premium.D) time premium.E) arithmetic average return.

Over the long-term, which one of the following is a correct statement concerning risk premium?A) The lower the volatility of returns, the greater the risk premium.B) Stocks tend to have a higher risk premium than bonds.C) The lower the rate of return, the greater the risk premium.D) The risk premium does not affect the rate of return.E) The risk premium varies by the same percentage rate as the inflation rate.

The average compound return earned per year over a multiyear period is called the ________ average return.A) realB) standardC) arithmeticD) variantE) geometric

The capital gains yield plus the dividend yield on a security is called theA) geometric return.B) total return.C) average period return.D) variance of returns.E) current yield.

Which one of these statements is correct?A) Treasury bills outperformed inflation every year during the period 1926-2015.B) Small-company stocks outperformed large-company stocks every year during the period 1926-2015.C) On an annual basis, small-company stocks had more consistent rates of return than did large-company stocks for the period 1926-2015.D) The inflation rate has been positive every year during the period 1926-2015.E) During the 1930s (Great Depression), long-term government bonds produced a relatively stable rate of return relative to large-company stocks.

Based on the period 1926 to 2015, which category of securities has outperformed all of the other categories?A) Long-term corporate bondsB) U.S. Treasury billsC) Small-company stocksD) Large-company stocksE) Long-term government bonds

Assume stocks A and B have had identical stock prices every day for the past 3 years. Stock A pays a dividend but Stock B does not. Which one of these statements applies to these stocks for the last 3 years?A) Their annual total rates of return are equal.B) Stock A's total return has been higher than Stock B's every year.C) Stock B's capital gain has exceeded Stock A's every year.D) Stock A's total return had to be positive every year.E) Stock B's holding period return exceeded that of Stock A.

Assume today is December 31, 2015. Approximately how long has it been since the annual rate of inflation as measured by the Consumer Price Index has been negative?A) Less than 40 yearsB) Between 40 and 50 yearsC) Between 50 and 60 yearsD) Between 60 and 70 yearsE) More than 70 years

For our historical comparison purposes, how are large-company stocks defined?A) Stocks of the lowest 20 percent of the firms listed on the NYSE based on market capitalizationB) Stocks with average annual returns that exceed the average annual return of the U.S. Treasury billC) Any firm that has been listed on the NYSE for 40 years or moreD) Stocks of firms included in the S&P 500 composite indexE) Stocks of firms that employ over 5,000 employees

Winter's just declared an increase in its annual dividend from $.82 a share to $.85 a share. If the stock price should remain constant, thenA) the capital gains yield would decrease.B) the capital gains yield would increase.C) the dividend yield would remain constant.D) the dividend yield would increase.E) neither the capital gains yield nor the dividend yield would change.