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Quiz 3 Chapter 5 and 6
Chapter 5: ___________________________________________________________________________
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1.
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You put up $50 at the
beginning of the year for an investment. The value of the investment grows 4%
and you earn a dividend of $3.50. Your HPR was ____.
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2.
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The ______ measure of
returns ignores compounding.
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3.
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If you want to
measure the performance of your investment in a fund, including the timing of
your purchases and redemptions, you should calculate the __________.
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A.
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geometric average
return
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B.
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arithmetic average
return
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C.
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dollar-weighted
return
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4.
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Which one of the
following measures time-weighted returns and allows for compounding?
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A.
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Geometric average
return
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B.
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Arithmetic average
return
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C.
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Dollar-weighted
return
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D.
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Historical average
return
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5.
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Rank the following
from highest average historical return to lowest average historical return
from 1926 to 2010.
I. Small stocks
II. Long-term bonds
III. Large stocks
IV. T-bills
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6.
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Rank the following
from highest average historical standard deviation to lowest average
historical standard deviation from 1926 to 2010.
I. Small stocks
II. Long-term bonds
III. Large stocks
IV. T-bills
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7.
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You have calculated
the historical dollar-weighted return, annual geometric average return, and
annual arithmetic average return. If you desire to forecast performance for
next year, the best forecast will be given by the ________.
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A.
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dollar-weighted
return
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B.
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geometric average return
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C.
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arithmetic average
return
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8.
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The complete
portfolio refers to the investment in _________.
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C.
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the risk-free asset
and the risky portfolio combined
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D.
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the risky portfolio
and the index
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9.
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You have calculated
the historical dollar-weighted return, annual geometric average return, and
annual arithmetic average return. You always reinvest your dividends and
interest earned on the portfolio. Which method provides the best measure of
the actual average historical performance of the investments you have
chosen?
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A.
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Dollar-weighted
return
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B.
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Geometric average
return
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C.
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Arithmetic average
return
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10.
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The holding period
return on a stock is equal to _________.
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A.
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the capital gain
yield over the period plus the inflation rate
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B.
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the capital gain
yield over the period plus the dividend yield
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C.
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the current yield
plus the dividend yield
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D.
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the dividend yield
plus the risk premium
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11.
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Your timing was good
last year. You invested more in your portfolio right before prices went up,
and you sold right before prices went down. In calculating historical
performance measures, which one of the following will be the largest?
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A.
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Dollar-weighted
return
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B.
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Geometric average
return
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C.
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Arithmetic average
return
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D.
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Mean holding-period
return
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12.
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Published data on
past returns earned by mutual funds are required to be ______.
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A.
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dollar-weighted returns
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13.
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The arithmetic
average of -11%, 15%, and 20% is ________.
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14.
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The geometric average
of -12%, 20%, and 25% is _________.
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15.
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The dollar-weighted
return is the _________.
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A.
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difference between
cash inflows and cash outflows
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B.
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arithmetic average
return
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C.
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geometric average
return
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D.
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internal rate of
return
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16.
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An investment earns
10% the first year, earns 15% the second year, and loses 12% the third year.
The total compound return over the 3 years was ______.
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17.
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Annual percentage
rates can be converted to effective annual rates by means of the following
formula:
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18.
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Suppose you pay
$9,700 for a $10,000 par Treasury bill maturing in 3 months. What is the holding-period
return for this investment?
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19.
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Suppose you pay
$9,800 for a $10,000 par Treasury bill maturing in 2 months. What is the
annual percentage rate of return for this investment?
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20.
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Suppose you pay
$9,400 for a $10,000 par Treasury bill maturing in 6 months. What is the
effective annual rate of return for this investment?
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