corporation-finance-test-bank-chapter--08

Chapter12-SomeLessonsfromCapitalMarketHistory12-1Chapter12SomeLessonsfromCapitalMarketHistoryAnswerKeyMultipleChoiceQuestions1.Lastyear,T-billsreturned2percentwhileyourinvestmentinlarge-companystocksearnedanaverageof5percent.Whichoneofthefollowingtermsreferstothedifferencebetweenthesetworatesofreturn?A.riskpremiumB.geometricreturnC.arithmeticD.standarddeviationE.varianceRefertosection12.3AACSB:N/ABloom's:ComprehensionDifficulty:BasicLearningObjective:12-1Section:12.3Topic:RiskpremiumChapter12-SomeLessonsfromCapitalMarketHistory12-22.Whichoneofthefollowingbestdefinesthevarianceofaninvestment'sannualreturnsoveranumberofyears?A.Theaveragesquareddifferencebetweenthearithmeticandthegeometricaverageannualreturns.B.Thesquaredsummationofthedifferencesbetweentheactualreturnsandtheaveragegeometricreturn.C.Theaveragedifferencebetweentheannualreturnsandtheaveragereturnfortheperiod.D.Thedifferencebetweenthearithmeticaverageandthegeometricaveragereturnfortheperiod.E.Theaveragesquareddifferencebetweentheactualreturnsandthearithmeticaveragereturn.Refertosection12.4AACSB:N/ABloom's:ComprehensionDifficulty:IntermediateLearningObjective:12-1Section:12.4Topic:Variance3.Standarddeviationisameasureofwhichoneofthefollowing?A.averagerateofreturnB.volatilityC.probabilityD.riskpremiumE.realreturnsRefertosection12.4AACSB:N/ABloom's:KnowledgeDifficulty:BasicLearningObjective:12-1Section:12.4Topic:StandarddeviationChapter12-SomeLessonsfromCapitalMarketHistory12-34.Whichoneofthefollowingisdefinedbyitsmeananditsstandarddeviation?A.arithmeticnominalreturnB.geometricrealreturnC.normaldistributionD.varianceE.riskpremiumRefertosection12.4AACSB:N/ABloom's:KnowledgeDifficulty:BasicLearningObjective:12-1Section:12.4Topic:Normaldistribution5.Theaveragecompoundreturnearnedperyearoveramulti-yearperiodiscalledthe_____averagereturn.A.arithmeticB.standardC.variantD.geometricE.realRefertosection12.5AACSB:N/ABloom's:KnowledgeDifficulty:BasicLearningObjective:12-1Section:12.5Topic:GeometricaveragereturnChapter12-SomeLessonsfromCapitalMarketHistory12-46.Thereturnearnedinanaverageyearoveramulti-yearperiodiscalledthe_____averagereturn.A.arithmeticB.standardC.variantD.geometricE.realRefertosection12.5AACSB:N/ABloom's:KnowledgeDifficulty:BasicLearningObjective:12-1Section:12.5Topic:Arithmeticaveragereturn7.Assumethatthemarketpricesofthesecuritiesthattradeinaparticularmarketfairlyreflecttheavailableinformationrelatedtothosesecurities.Whichoneofthefollowingtermsbestdefinesthatmarket?A.risklessmarketB.evenlydistributedmarketC.zerovolatilitymarketD.Blume'smarketE.efficientcapitalmarketRefertosection12.6AACSB:N/ABloom's:KnowledgeDifficulty:BasicLearningObjective:12-4Section:12.6Topic:EfficientcapitalmarketChapter12-SomeLessonsfromCapitalMarketHistory12-58.Whichoneofthefollowingstatementsbestdefinestheefficientmarkethypothesis?A.Efficientmarketslimitcompetition.B.Securitypricesinefficientmarketsremainsteadyasnewinformationbecomesavailable.C.Mispricedsecuritiesarecommoninefficientmarkets.D.Allsecuritiesinanefficientmarketarezeronetpresentvalueinvestments.E.Profitsareremovedasamarketincentivewhenmarketsbecomeefficient.Refertosection12.6AACSB:N/ABloom's:ComprehensionDifficulty:BasicLearningObjective:12-4Section:12.6Topic:Efficientmarkets9.Stacypurchasedastocklastyearandsoldittodayfor$3asharemorethanherpurchaseprice.Shereceivedatotalof$0.75individends.Whichoneofthefollowingstatementsiscorrectinrelationtothisinvestment?A.Thedividendyieldisexpressedasapercentageofthesellingprice.B.ThecapitalgainwouldhavebeenlesshadStacynotreceivedthedividends.C.Thetotaldollarreturnpershareis$3.D.Thecapitalgainsyieldispositive.E.Thedividendyieldisgreaterthanthecapitalgainsyield.Refertosection12.1AACSB:N/ABloom's:ComprehensionDifficulty:BasicLearningObjective:12-1Section:12.1Topic:ReturnsChapter12-SomeLessonsfromCapitalMarketHistory12-610.Whichoneofthefollowingcorrectlydescribesthedividendyield?A.nextyear'sannualdividenddividedbytoday'sstockpriceB.thisyear'sannualdividenddividedbytoday'sstockpriceC.thisyear'sannualdividenddividedbynextyear'sexpectedstockpriceD.nextyear'sannualdividenddividedbythisyear'sannualdividendE.theincreaseinnextyear'sdividendoverthisyear'sdividenddividedbythisyear'sdividendRefertosection12.1AACSB:N/ABloom's:KnowledgeDifficulty:BasicLearningObjective:12-1Section:12.1Topic:Dividendyield11.BaysideMarinajustannounceditisdecreasingitsannualdividendfrom$1.64pershareto$1.50pershareeffectiveimmediately.Ifthedividendyieldremainsatitspre-announcementlevel,thenyouknowthestockprice:A.wasunaffectedbytheannouncement.B.increasedproportionatelywiththedividenddecrease.C.decreasedproportionatelywiththedividenddecrease.D.decreasedby$0.14pershare.E.increasedby$0.14pershare.Refertosection12.1AACSB:N/ABloom's:ComprehensionDifficulty:IntermediateLearningObjective:12-1Section:12.1Topic:DividendyieldChapter12-SomeLessonsfromCapitalMarketHistory12-712.Whichoneofthefollowingstatementsrelatedtocapitalgainsiscorrect?A.Thecapitalgainsyieldincludesonlyrealizedcapitalgains.B.Anincreaseinanunreali