WEEK 2 (RISK & RETURN)

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Questions and Answers

using the following returns, calculate the variances for Mary Ann's stock

  • 0.098
  • 0.058 (correct)
  • 0.167
  • 0.214

In last question, suppose the average inflation rate of over this period was 8%, what was the real return of the average return on Mary Ann’s stock?

  • 37.96%
  • 1.8%
  • 1.67% (correct)
  • 9.8%

If Franco Plc has a 5% probability of 6% returns, 15% probability of 55% returns, 30% probability of 12% returns, and 50% probability of 18% returns, the expected return of shares of Franco Plc is:

  • 21.15% (correct)
  • 17.63%
  • 28.75%
  • 9.76%

A stock has had return of 27%, 12%, 32%, -12%, 19%, and -31% over the last six years. What are the arithmetic and geometric returns for the stock?

<p>Arithmetic average return 7.83%; Geometric average return 5.22% (D)</p> Signup and view all the answers

A stock has had return of 11%, -5%, and 9% over the last three years. An investment of $100 at the beginning of the period would be worth _____ at the end of three years.

<p>115 (A)</p> Signup and view all the answers

Suppose you buy a company’s stock at the beginning of the year and hold it through the year. During the period, the stock price increases from $10 per share to $14 per share. Which on of the following statement is TURE?

<p>If you do NOT sell your shares at year-end, you should consider the capital gain of $4 (=$14-10) as part of your return. (B)</p> Signup and view all the answers

In the case of normal distribution, given the SD of a stock is 20.1%, the mean return is 12.1%, which one of the following statement is correct?

<p>There is a 99.74 percent probability that a yearly return will be between -48.2 percent and 72.4 percent. (C)</p> Signup and view all the answers

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