# Finance 101 Final

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1. 1. The total dollar return on a share of stock is defined as the:
B. capital gain or loss plus any dividend income.
C. change in the stock price divided by the original stock price
D. dividend income divided by the beginning price per share.
E. change in the price of the stock over a period of time.
B. capital gain or loss plus any dividendincome.
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2. 2. The dividend yield is defined as the annual dividend expressed as a percentage of the:
A. average stock price.
B. total annual return.
C. initial stock price.
D. capital gain.
E. ending stock price.
C. initial stock price.
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3. 3. The capital gains yield is equal to:
A. (Pt - Pt + 1 + Dt + 1) / Pt + 1.
B. (Pt + 1 - Pt + Dt) / Pt.
C. Dt + 1 / Pt.
D. (Pt + 1 - Pt) / Pt.
E. (Pt + 1 - Pt) / Pt + 1.
4. 4. When the total return on an investment is expressed on a per-year basis it is called the:
A. holding period return.
B. capital gains yield.
C. initial return.
D. effective annual return.
E. dividend yield.
D. effective annual return.
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5. 5. The risk-free rate is:
A. the rate of return on a riskless investment.
B. the rate of return earned on an investment in a firm that you personally own.
C. defined as the total of the capital gains yield plus the dividend yield.
D. another term for the dividend yield.
E. defined as the increase in the value of a share of stock over time.
A. the rate of return on a riskless investment.
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6. 6. The rate of return earned on a U.S. Treasury bill is referred to as the:
B. deflated rate of return.
C. risk-free rate.
D. expected rate of return.
E. market rate of return.
C. risk-free rate.
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7. 7. The risk premium is defined as the rate of return on:
A. the overall market.
B. a risky asset minus the risk-free rate.
C. a riskless investment..
D. a U.S. Treasury bill.
E. a risky asset minus the inflation rate.
B. a risky asset minus the risk-free rate.
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8. 8. The additional return earned for accepting risk is called the:
A. inflated return.
C. riskless rate.
D. capital gains yield.
E. real return.
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9. 9. The standard deviation is a measure of:
A. changes in dividend yields.
B. changes in the capital gains rate.
C. volatility.
D. total return.
E. capital gains.
C. volatility.
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10. 10. A frequency distribution, which is completely defined by its average and standard deviation, is referred to as a(n):
A. normal distribution.
B. average arithmetic return.
C. variance distribution.
D. average geometric return.
E. expected rate of return.
A. normal distribution.
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11. 11. The arithmetic average return is the:
A. average compound return earned per year over a multiyear period.
B. average squared return earned in a single year.
C. summation of the returns for a number of years, t, divided by (t - 1).
D. compound total return for a period of years, t, divided by t.
E. return earned in an average year over a multiyear period.
E. return earned in an average year over a multiyear period.
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12. 12. The average compound return earned per year over a multiyear period is called the:
A. arithmetic average return.
B. total return.
C. average capital gains yield.
D. variance.
E. geometric average return.
E. geometric average return.
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13. 13. Which one of the following statements is correct concerning the dividend yield and the total return?
A. The total return must be greater than the dividend yield.
B. The total return plus the capital gains yield is equal to the dividend yield.
C. The dividend yield can be zero while the total return must be a positive value.
D. The dividend yield exceeds the total return when a stock increases in value.
E. The total return can be negative but the dividend yield cannot be negative.
E. The total return can be negative but thedividend yield cannot be negative.
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14. 14. An annualized return:
A. is computed as (1 + holding period percentage return)m, where m is the number of months in the holding period.
B. is expressed as the summation of the capital gains yield and the dividend yield on an investment.
C. is expressed as the capital gains yield that would have been realized if an investment had been held for a twelve-month period.
D. is less than a holding period return when the holding period is less than one year.
E. is computed as (1 + holding period percentage return)m, where m is the number of holding periods in a year.
E. is computed as (1 + holding periodpercentage return)m, where m is the number of holding periods in ayear.
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15. 15. Stacey purchased 300 shares of Coulter Industries stock and held it for 4 months before reselling it. What is the value of "m" when computing the annualized return on this investment?
A. 4.00
B. 3.00
C. .40
D. .25
E. .33
B. 3.00
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16. 16. Capital gains are included in the return on an investment:
A. only if the investment incurs a loss in value or is sold.
B. only if the investment is sold and the capital gain is realized.
C. whether or not the investment is sold.
D. when either the investment is sold or the investment has been owned for at least one year.
E. whenever dividends are paid.
C. whether or not the investment is sold.
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17. 17. When we refer to the rate of return on an investment, we are generally referring to the:
A. effective annual rate of return.
B. capital gains yield.
C. dividend yield.
D. total percentage return.
E. annualized dividend yield.
D. total percentage return.
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18. 18. Which one of the following should be used to compare the overall performance of three different investments?
A. holding period percentage return
B. capital gains yield
C. dividend yield
D. effective annual return
E. holding period dollar return
D. effective annual return
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19. 19. If you multiply the number of shares of outstanding stock for a firm by the price per share, you are computing the firm's:
A. total book value.
B. market capitalization.
C. equity ratio.
D. time value.
E. market share.
B. market capitalization.
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20. 20. Which one of the following is considered the best method of comparing the returns on various-sized investments?
A. real dollar return
B. variance return
C. absolute dollar return
D. percentage return
E. total dollar return
D. percentage return
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21. 21. Which one of the following had the highest average return for the period 1926-2006?
A. long-term government bonds
B. U.S. Treasury bills
C. long-term corporate bonds
D. large-company stocks
E. small-company stocks
E. small-company stocks
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22. 22. Which one of the following statements is correct based on the historical returns for the period 1926-2006?
A. For the period, large-company stocks outperformed small-company stocks.
B. Small-company stocks outperformed large-company stocks every year during the period.
C. For the period, Treasury bills yielded a higher rate of return than long-term government bonds.
D. Bond prices, in general, were more volatile than stock prices.
E. The inflation rate exceeded the rate of return on Treasury bills during some years.
E. The inflation rate exceeded the rate of return on Treasury bills during some years.
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23. 23. Inflation, as measured by the Consumer Price Index, was highest during the period:
A. 1977-1982.
B. 1992-1997.
C. 1952-1957.
D. 2001-2006.
E. 1930-1935.
A. 1977-1982.
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24. 24. Large-company stocks produced the highest rates of return during the period:
A. 1969-1970.
B. 2004-2006
C. 1939-1941.
D. 2000-2002.
E. 1995-1997.
E. 1995-1997.
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25. 25. Which category(ies) of investments had an annual rate of return that exceeded 100 percent for at least one year during the period 1926-2006?
A. both large-company and small-company stocks
B. corporate bonds, large-company stocks, and small-company stocks
C. only large-company stocks
D. only small-company stocks
E. No category earned an annual return in excess of 100 percent for any given year during the period.
D. only small-company stocks
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26. 26. For the period 1926-2006, the annual return on large-company stocks:
A. was negative following every three-year period of positive returns.
B. was unpredictable based on the prior year's performance.
C. was only negative for two or more consecutive years during the Great Depression.
D. remained negative for at least two consecutive years anytime that it was negative.
E. never exceeded a positive 30 percent nor lost more than 20 percent.
B. was unpredictable based on the prior year'sperformance.
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 Author: SusanneS28 ID: 219977 Card Set: Finance 101 Final Updated: 2013-05-16 22:26:49 Tags: Finance 101 Final Folders: Description: Finance 101 Final Show Answers: