Question 1

Winslow, Inc. stock is currently selling for $40 a share. The stock has a dividend yield of 3.8%. How much dividend income will you receive per year if you purchase 500 shares of this stock?

A. $152
B. $190
C. $329
D. $760
E. $1,053

Question 2

Excelsior shares are currently selling for $25 each. You bought 200 shares one year ago at $24 and received dividend payments of $1.50 per share. What was your percentage capital gain this year?

A. 4.17%
B. 6.25%
C. 10.42%
D. 104.17%
E. 110.42%

Question 3

Six months ago, you purchased 1,200 shares of ABC stock for $21.20 a share. You have received dividend payments equal to $.60 a share. Today, you sold all of your shares for $22.20 a share. What is your total dollar return on this investment?

A. $720
B. $1,200
C. $1,440
D. $1,920
E. $3,840

Question 4

Kids Toy Co. has had total returns over the past five years of 0%, 7%, -2%, 10%, and 12%. What was the arithmetic average return on this stock?

A. 5.40%
B. 5.50%
C. 6.15%
D. 6.33%
E. 6.75%

Question 5

Six months ago, you purchased 100 shares of stock in ABC Co. at a price of $43.89 a share. ABC stock pays a quarterly dividend of $.10 a share. Today, you sold all of your shares for $45.13 per share. What is the total amount of your capital gains on this investment?

A. $1.24
B. $1.64
C. $40.00
D. $124.00
E. $164.00

Question 6

A stock had returns of 8%, -2%, 4%, and 16% over the past four years. What is the standard deviation of this stock for the past four years?

A. 6.3%
B. 6.6%
C. 7.1%
D. 7.5%
E. 7.9%

Question 7

A stock had returns of 8%, 39%, 11%, and -24% for the past four years. Which one of the following best describes the probability that this stock will NOT lose more than 43% in any one given year?

A. 84.0%
B. 95.0%
C. 97.5%
D. 99.0%
E. 99.5%

Question 8

One year ago, you purchased a stock at a price of $32 a share. Today, you sold the stock and realized a total return of 25%. Your capital gain was $6 a share. What was your dividend yield on this stock?

A. 1.25%
B. 3.75%
C. 6.25%
D. 18.75%
E. 21.25%

Question 9

The market has an expected rate of return of 9.8%. The long-term government bond is expected to yield 4.5% and the U.S. Treasury bill is expected to yield 3.4%. The inflation rate is 3.1%. What is the market risk premium?

A. 2.2%
B. 3.3%
C. 5.3%
D. 6.4%
E. 6.7%

Question 10

As we add more securities to a portfolio, the ____ will decrease:

A. total risk.
B. systematic risk.
C. unsystematic risk.
D. economic risk.
E. standard error.

Question 11

The intercept point of the security market line is the rate of return which corresponds to:

A. the risk-free rate of return.
B. the market rate of return.
C. a value of zero.
D. a value of 1.0.
E. the beta of the market.

Question 12

A stock with an actual return that lies above the security market line:

A. has more systematic risk than the overall market.
B. has more risk than warranted based on the realized rate of return.
C. has yielded a higher return than expected for the level of risk assumed.
D. has less systematic risk than the overall market.
E. has yielded a return equivalent to the level of risk assumed.

Question 13

The combination of the efficient set of portfolios with a riskless lending and borrowing rate results in:

A. the capital market line which shows that all investors will only invest in the riskless asset.
B. the capital market line which shows that all investors will invest in a combination of the riskless asset and the tangency portfolio.
C. the security market line which shows that all investors will invest in the riskless asset only.
D. the security market line which shows that all investors will invest in a combination of the riskless asset and the tangency portfolio.
E. None of these.

Question 14

You recently purchased a stock that is expected to earn 12% in a booming economy, 8% in a normal economy and lose 5% in a recessionary economy. There is a 15% probability of a boom, a 75% chance of a normal economy, and a 10% chance of a recession. What is your expected rate of return on this stock?

A. 5.00%
B. 6.45%
C. 7.30%
D. 7.65%
E. 8.30%

Question 15

The common stock of Chai Tea Inc has an expected return of 14.4%. The return on the market is 10% and the risk-free rate of return is 3.5%. What is the beta of this stock?

A. 0.65
B. 1.09
C. 1.32
D. 1.44
E. 1.68.