FIN 320 Week 4 Quiz – Strayer



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Quiz 3 Chapter 5 and 6

Chapter 5: ___________________________________________________________________________
1.
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 ____. 
 

A. 
4%

B. 
3.5%

C. 
7%

D. 
11%

2.
The ______ measure of returns ignores compounding. 
 

A. 
geometric average

B. 
arithmetic average

C. 
IRR

D. 
dollar-weighted

3.
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 __________. 
 

A. 
geometric average return

B. 
arithmetic average return

C. 
dollar-weighted return

D. 
index return

4.
Which one of the following measures time-weighted returns and allows for compounding? 
 

A. 
Geometric average return

B. 
Arithmetic average return

C. 
Dollar-weighted return

D. 
Historical average return

5.
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 
 

A. 
I, II, III, IV

B. 
III, IV, II, I

C. 
I, III, II, IV

D. 
III, I, II, IV

6.
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 
 

A. 
I, II, III, IV

B. 
III, IV, II, I

C. 
I, III, II, IV

D. 
III, I, II, IV

7.
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 ________. 
 

A. 
dollar-weighted return

B. 
geometric average return

C. 
arithmetic average return

D. 
index return

8.
The complete portfolio refers to the investment in _________. 
 

A. 
the risk-free asset

B. 
the risky portfolio

C. 
the risk-free asset and the risky portfolio combined

D. 
the risky portfolio and the index

9.
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? 
 

A. 
Dollar-weighted return

B. 
Geometric average return

C. 
Arithmetic average return

D. 
Index return

10.
The holding period return on a stock is equal to _________. 
 

A. 
the capital gain yield over the period plus the inflation rate

B. 
the capital gain yield over the period plus the dividend yield

C. 
the current yield plus the dividend yield

D. 
the dividend yield plus the risk premium

11.
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? 
 

A. 
Dollar-weighted return

B. 
Geometric average return

C. 
Arithmetic average return

D. 
Mean holding-period return

12.
Published data on past returns earned by mutual funds are required to be ______. 
 

A. 
dollar-weighted returns

B. 
geometric returns

C. 
excess returns

D. 
index returns

13.
The arithmetic average of -11%, 15%, and 20% is ________. 
 

A. 
15.67%

B. 
8%

C. 
11.22%

D. 
6.45%

14.
The geometric average of -12%, 20%, and 25% is _________. 
 

A. 
8.42%

B. 
11%

C. 
9.7%

D. 
18.88%

15.
The dollar-weighted return is the _________. 
 

A. 
difference between cash inflows and cash outflows

B. 
arithmetic average return

C. 
geometric average return

D. 
internal rate of return

16.
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 ______. 
 

A. 
41.68%

B. 
11.32%

C. 
3.64%

D. 
13%

17.
Annual percentage rates can be converted to effective annual rates by means of the following formula: 
 

A. 
[1 + (APR/n)]n - 1

B. 
(APR)(n)

C. 
(APR/n)

D. 
(periodic rate)(n)

18.
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? 
 

A. 
3.01%

B. 
3.09%

C. 
12.42%

D. 
16.71%

19.
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? 
 

A. 
2.04%

B. 
12 %

C. 
12.24%

D. 
12.89%


20.
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? 
 

A. 
6.38%

B. 
12.77%

C. 
13.17%

D. 
14.25%

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