1.Today, you sold 200 shares of Indian River Produce stock. Your total return on
ID: 2776267 • Letter: 1
Question
1.Today, you sold 200 shares of Indian River Produce stock. Your total return on these shares is 6.2%. You purchased the shares one year ago at a price of $31.10 a share. You have received a total of $100 in dividends over the course of the year. What is your capital gains yield on this investment?
a.
5.67%
b.
4.59%
c.
7.41%
d.
7.26%
e.
3.68%
2. A stock has annual returns of 13 percent, 21 percent, -12 percent, 7 percent, and -6 percent for the past five years. The arithmetic average of these returns is _____ percent while the geometric average return for the period is _____ percent.
4.60; 3.89
3.89; 3.62
4.60; 3.62
3.89; 4.60
3.62; 3.89
3. An increase in the unsystematic risk of a portfolio will _____ the portfolio's beta.
either increase or not change
decrease
either decrease or not change
not change
increase
4. The standard deviation of a portfolio:
considers the current value of the investments within that portfolio.
measures only the unsystematic risk of that portfolio.
measures only the systematic risk of that portfolio.
is equal to the weighted arithmetic average of the standard deviations of the individual securities included in the portfolio.
is based on a geometric average of the standard deviations of the individual securities included in the portfolio.
5.Which one of the following is considered an example of systematic risk?
lower company sales than predicted
an increase in overseas sales for a conglomerate, such as General Electric
resignation of a firm's chief financial officer
higher company profits than those forecasted
a higher inflation rate than predicted
a.
5.67%
b.
4.59%
c.
7.41%
d.
7.26%
e.
3.68%
Explanation / Answer
1. Capital gains yield = 6.2% - $100 / (200*$31.10) * 100%
= 4.59% which is option (b).
2. Arithmetic average return = (13% + 21% - 12% + 7% - 6%) / 5
= 4.60%
Geomteric average return = [{(1+13%) * (1+21%) * (1-12%) * (1+7%) * (1-6%)}1/5 - 1] * 100%
= 3.89%
Therefore, option (a).
3. (d) not change
4. (d) is equal to the weighted arithmetic average of the standard deviations of the individual securities included in the portfolio
5. (e) a higher inflation rate than predicted
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