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SOC 202 (376)
Louis Pike (20)


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Ryerson University
SOC 202
Louis Pike

TOTAL DOLLAR RETURN B 1. The total dollar return on an equity investment is defined as: A. All cash flows and gains from an investment, excluding any losses. B. All cash inflows such as dividends and capital gains or losses. C. The increase in the price of an asset. D. Capital gains received. E. Only the capital gains received, not including capital gains not realized. Level: Easy DIVIDEND YIELD E 2. Annual dividend yield at time (t + 1), Dt+1divided by the stock price at time t,tP is called the: A. Annualized rate of return B. Capital gain C. Total annual rate of return D. Total dollar return E. Dividend yield Level: Easy CAPITAL GAINS YIELD C 3. Capital gains yield is equal to: A. (P t P t + 1 Pt + 1 B. D t+1/ t C. (P – P) / P t + 1 t t D. (P t P t + 1 Pt E. P t (P t + 1Pt Level: Medium RISK PREMIUM D 4. The risk premium is defined as the rate of return on A. A risky asset minus the inflation rate B. The overall market C. A Treasury bill D. A risky asset minus the risk-free rate E. A risk-less investment Level: Easy VARIANCE E 5. The variance measure the: A. Total difference between the actual returns and the average returns B. Average difference between the actual squared returns and the risk-free returns C. Average squared difference between the actual returns and the risk-free returns D. Total difference between the average returns and the risk-free returns E. Average squared difference between the actual and the average returns Level: Medium STANDARD DEVIATION A 6. The standard deviation is a measure of: © 2009 McGraw-Hill Ryerson Ltd. 1-1 A. Volatility. B. Return. C. Performance. D. Capital gains. E. The risk premium. Level: Easy TIME VALUE OF MONEY A 7. The risk-free rate that is paid as compensation for waiting is referred to as the: A. Time value of money B. Real rate of return C. Total dollar return D. Average real return E. Financial reward Level: Easy RISK-FREE RATE C 8. The rate of return on an asset with no uncertainty regarding its return is known as the ____. A typical example is the rate of return earned on a Treasury bill. A. Risk premium. B. Capital gains yield. C. Risk-free rate. D. Dividend yield. E. Compound return. Level: Easy ARITHMETIC AVERAGE RETURN D 9. The arithmetic average return is the return earned in an average year over a multi-year period. For calculation you: A. Add up all the returns and divide by the number of observations minus one. B. Add one to each return, multiply these values, find the 1/n root, and subtract one. C. Subtract the lowest return from the highest return. D. Add up all the returns and divide by the number of observations. E. Find the return that is exactly in the middle of the highest and lowest return. Level: Easy GEOMETRIC AVERAGE RETURN B 10. The geometric average return is the: A. Summation of the returns for a number of years divided by the n root when n equal the number of years B. Average compound return earned per year over a multi-year period C. Compound total return for a period of years divided by the number of years in the period D. Return earned in an average year over a multi-year period E. Average squared return earned in a single year Level: Medium CAPITAL GAINS D 11. The value that is equal to the ending price of a security minus the beginning price is called the: © 2009 McGraw-Hill Ryerson Ltd. 1-2 A. Geometric return. B. Negative dividend. C. risk premium. D. capital gain or loss. E. Percentage return. Level: Easy RISK-RETURN TRADE-OFF C 12. The fact that higher returns are associated with higher standard deviation is known as the: A. Real return factor B. Geometric relationship C. Risk-return tradeoff D. Market variance E. Market capitalization Level: Easy RATE OF RETURN A 13. Rate of return is expressed on a _____ basis. A. Percentage B. Increase C. Equity D. Absolute E. Gain Level: Easy MARKET CAPITALIZATION D 14. A company’s total market capitalization is found by: A. The quoted price of its shares divided by the number of shares in issue B. The income stream in the future C. The use of numbers drawn randomly from probability distributions D. The quoted price of its shares times the number of shares in issue E. The technique for minimizing the operating costs Level: Easy RISK PREMIUM D 15. The reward for bearing risk is known as the: A. Excess return. B. Volatility. C. Geometric premium. D. Risk premium. E. Dividend yield. Level: Easy TOTAL RETURN B 16. The total percentage return on an equity investment typically has two components known as © 2009 McGraw-Hill Ryerson Ltd. 1-3 ____ and ____. A. Principal and interest. B. Capital gains yield and dividend yield. C. Arithmetic yield and geometric yield. D. Dollar gain and capital gains. E. Dividends and cash payments. Level: Medium NORMAL DISTRIBUTION A 17. The frequency distribution that is completely defined by its average and standard deviation is referred to as a(n): A. Normal distribution B. Variance distribution C. Expected rate of return D. Average geometric return E. Average arithmetic return Level: Easy NORMAL DISTRIBUTION C 18. Another name for a normal distribution is the: A. Risk-return tradeoff B. Geometric dispersion C. Bell curve D. Average tendency E. Time value continuum Level: Easy II. CONCEPTS NORMAL DISTRIBUTION D 19. You purchased a stock for $21 and later sold it for $27. You also received a dividend of $1.40. The total percentage return on your investment is computed as A. $27 - $21 B. $27 - $21 + $1.40 C. ($27 - $21) / $27 D. ($27 - $21 + $1.40) / $21 E. ($27 - $21 + $1.40) / $27 Level: Medium RETURNS B 20. For proper comparisons among investments, the best measure of return is _________ return. A. Dollar B. Percentage C. capital gains D. Dividend E. Stock Level: Easy DIVIDEND AND CAPITAL-GAIN YIELDS © 2009 McGraw-Hill Ryerson Ltd. 1-4 E 21. The dividend yield on a stock will be ____, while the capital gains yield will be ____. A. Positive; either positive or zero B. Positive; positive C. Positive; negative, positive or zero D. Positive or zero; positive or zero E. Positive or zero; negative, positive or zero Level: Medium CAPITAL GAINS AND DIVIDENDS C 22. A major difference between dividends and capital gains is that: A. Capital gains are always positive. B. Capital gains affect the total return while dividends do not. C. Capital gains are in increase in stock price while dividends are cash payments to stockholders. D. Dividends affect the total return while capital gains do not. E. Capital gains are only accounted for on an annual basis while dividends are accounted for when paid. Level: Easy CAPITAL GAINS D 23. It is important to account for capital gains: A. On an annual basis. B. Whenever the asset is sold and the capital gain is realized. C. Whenever dividends are paid. D. Whenever they occur, whether or not the asset is sold. E. If the asset incurs a loss in value. Level: Hard CAPITAL GAINS A 24. Which of the following is true regarding capital gains? A. Gains must be included whenever they occur regardless the status of the investment B. Gains have to be computed on an annual basis C. Gains are only included when they are realized at the time the investment is sold D. Both (A) and (B) E. Both (B) and (C) Level: Medium MARKET CAPITALIZATION D 25. If you multiply the number of shares outstanding stock for a firm by the price per share, you are look
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