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Exam 12: Some Lessons From Capital Market History

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Question 51

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A stock had returns of 15 percent,8 percent,12 percent,-15 percent,and -4 percent for the past five years.Based on these returns,what is the approximate probability that this stock will return at least 20 percent in any one given year?

A) less than 0.5 percent
B) greater than 0.5 percent but less than 1.0 percent
C) greater than 1.0 percent but less than 2.5 percent
D) greater than 2.5 percent but less than 16 percent
E) greater than 16.0 percent

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Question 52

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A stock had returns of 14 percent,13 percent,-10 percent,and 7 percent for the past four years.Which one of the following best describes the probability that this stock will lose no more than 10 percent in any one year?

A) greater than 0.5 but less than 1.0 percent
B) greater than 1.0 percent but less than 2.5 percent
C) greater than 2.5 percent but less than 16 percent
D) greater than 84 percent but less than 97.5 percent
E) greater than 95 percent

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Question 53

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The excess return is computed as the:

Stacy purchased a stock last year and sold it today for $3 a share more than her purchase price.She received a total of $0.75 in dividends.Which one of the following statements is correct in relation to this investment?

Inside information has the least value when financial markets are:

Which one of the following time periods is associated with high rates of inflation?

The U.S.Securities and Exchange Commission periodically charges individuals with insider trading and claims those individuals have made unfair profits.Given this,you would be most apt to argue that the markets are less than _____ form efficient.

Which one of the following statements related to capital gains is correct?

You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 3 percent,-10 percent,24 percent,22 percent,and 12 percent.Suppose the average inflation rate over this time period was 3.6 percent and the average T-bill rate was 4.8 percent.Based on this information,what was the average nominal risk premium?

Which one of the following statements is correct based on the historical record for the period 1926-2010?

Which one of the following best defines the variance of an investment's annual returns over a number of years?

You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 2 percent,-12 percent,16 percent,22 percent,and 18 percent.What is the variance of these returns?

A year ago,you purchased 300 shares of Stellar Wood Products,Inc.stock at a price of $8.62 per share.The stock pays an annual dividend of $0.10 per share.Today,you sold all of your shares for $4.80 per share.What is your total dollar return on this investment?

Which one of the following is most indicative of a totally efficient stock market?

Which two of the following are the most likely reasons why a stock price might not react at all on the day that new information related to the stock issuer is released? I.insiders knew the information prior to the announcement II.investors need time to digest the information prior to reacting III.the information has no bearing on the value of the firm IV.the information was anticipated

According to Jeremy Siegel,the real return on stocks over the long-term has averaged about:

Your friend is the owner of a stock which had returns of 25 percent,-36 percent,1 percent,and 16 percent for the past four years.Your friend thinks the stock may be able to achieve a return of 50 percent or more in a single year.Based on these returns,what is the probability that your friend is correct?

The average annual return on small-company stocks was about _____ percent greater than the average annual return on large-company stocks over the period 1926-2010.