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1、Chapter 05Introduction to Risk, Return, and the Historical Record Multiple Choice Questions1.Over the past year you earned a nominal rate of interest of 10 percent on your money. The inflation rate was 5 percent over the same period. The exact actual growth rate of your purchasing power wasA.15.5%.B
2、.10.0%.C.5.0%.D.4.8%.E.15.0%.2.Over the past year you earned a nominal rate of interest of 8 percent on your money. The inflation rate was 4 percent over the same period. The exact actual growth rate of your purchasing power wasA.15.5%.B.10.0%.C.3.8%.D.4.8%.E.15.0%.3.A year ago, you invested $1,000
3、in a savings account that pays an annual interest rate of 7%. What is your approximate annual real rate of return if the rate of inflation was 3% over the year?A.4%B.10%C.7%D.3%E.6%4.A year ago, you invested $10,000 in a savings account that pays an annual interest rate of 5%. What is your approxima
4、te annual real rate of return if the rate of inflation was 3.5% over the year?A.1.5%B.10%C.7%D.3%E.1%5.If the annual real rate of interest is 5% and the expected inflation rate is 4%, the nominal rate of interest would be approximatelyA.1%.B.9%.C.20%.D.15%.E.7%.6.If the annual real rate of interest
5、is 2.5% and the expected inflation rate is 3.7%, the nominal rate of interest would be approximatelyA.3.7%.B.6.2%.C.2.5%.D.1.2%.E.4.3%.7.You purchased a share of stock for $20. One year later you received $1 as a dividend and sold the share for $29. What was your holding-period return?A.45%B.50%C.5%
6、D.40%E.32%8.You purchased a share of stock for $30. One year later you received $1.50 as a dividend and sold the share for $32.25. What was your holding-period return?A.12.5%B.12.0%C.13.6%D.11.8%E.14.1%9.Which of the following determine(s) the level of real interest rates? I) The supply of savings b
7、y households and business firms.II) The demand for investment funds.III) The governments net supply and/or demand for funds.A.I only.B.II only.C.I and II only.D.I, II, and III.E.III only.10.Which of the following statement(s) is (are) true? I) The real rate of interest is determined by the supply an
8、d demand for funds.II) The real rate of interest is determined by the expected rate of inflation.III) The real rate of interest can be affected by actions of the Fed.IV) The real rate of interest is equal to the nominal interest rate plus the expected rate of inflation.A.I and II only.B.I and III on
9、ly.C.III and IV only.D.II and III only.E.I, II, III, and IV only.11.Which of the following statements is true?A.Inflation has no effect on the nominal rate of interest.B.The realized nominal rate of interest is always greater than the real rate of interest.C.Certificates of deposit offer a guarantee
10、d real rate of interest.D.Certificates of deposit offer a guaranteed nominal rate of interest.E.Inflation has no effect on the nominal rate of interest, the realized nominal rate of interest is always greater than the real rate of interest, and certificates of deposit offer a guaranteed real rate of
11、 interest.12.Other things equal, an increase in the government budget deficitA.drives the interest rate down.B.drives the interest rate up.C.might not have any effect on interest rates.D.always increases business prospects.E.never increases business prospects.13.Ceteris paribus, a decrease in the de
12、mand for loanable fundsA.drives the interest rate down.B.drives the interest rate up.C.might not have any effect on interest rates.D.results from an increase in business prospects and a decrease in the level of savings.E.results from an increase in business prospects and a increase in the level of s
13、avings.14.The holding-period return (HPR) on a share of stock is equal toA.the capital gain yield during the period, plus the inflation rate.B.the capital gain yield during the period, plus the dividend yield.C.the current yield, plus the dividend yield.D.the dividend yield, plus the risk premium.E.
14、the change in stock price.15.Historical records regarding return on stocks, Treasury bonds, and Treasury bills between 1926 and 2009 show thatA.stocks offered investors greater rates of return than bonds and bills.B.stock returns were less volatile than those of bonds and bills.C.bonds offered inves
15、tors greater rates of return than stocks and bills.D.bills outperformed stocks and bonds.E.treasury bills always offered a rate of return greater than inflation.16.If the interest rate paid by borrowers and the interest rate received by savers accurately reflect the realized rate of inflation:A.borr
16、owers gain and savers lose.B.savers gain and borrowers lose.C.both borrowers and savers lose.D.neither borrowers nor savers gain or lose.E.both borrowers and savers gain.You have been given this probability distribution for the holding-period return for KMP stock:17.What is the expected holding-peri
17、od return for KMP stock?A.10.40%B.9.32%C.11.63%D.11.54%E.10.88%18.What is the expected standard deviation for KMP stock?A.6.91%B.8.13%C.7.79%D.7.25%E.8.85%19.What is the expected variance for KMP stock?A.66.04%B.69.96%C.77.04%D.63.72%E.78.45%20.If the nominal return is constant, the after-tax real r
18、ate of returnA.declines as the inflation rate increases.B.increases as the inflation rate increases.C.declines as the inflation rate declines.D.increases as the inflation rate decreases.E.declines as the inflation rate increases and increases as the inflation rate decreases.21.The risk premium for c
19、ommon stocksA.cannot be zero, for investors would be unwilling to invest in common stocks.B.must always be positive, in theory.C.is negative, as common stocks are risky.D.cannot be zero, for investors would be unwilling to invest in common stocks and must always be positive, in theory.E.cannot be ze
20、ro, for investors would be unwilling to invest in common stocks and is negative, as common stocks are risky.22.If a portfolio had a return of 15%, the risk free asset return was 3%, and the standard deviation of the portfolios excess returns was 34%, the risk premium would be _.A.31%B.18%C.49%D.12%E
21、.29%23.You purchase a share of Boeing stock for $90. One year later, after receiving a dividend of $3, you sell the stock for $92. What was your holding-period return?A.4.44%B.2.22%C.3.33%D.5.56%E.5.91%24.Toyota stock has the following probability distribution of expected prices one year from now:If
22、 you buy Toyota today for $55 and it will pay a dividend during the year of $4 per share, what is your expected holding-period return on Toyota?A.17.72%B.18.89%C.17.91%D.18.18%E.16.83%25.Which of the following factors would not be expected to affect the nominal interest rate?A.The supply of loanable
23、 fundsB.The demand for loanable fundsC.The coupon rate on previously issued government bondsD.The expected rate of inflationE.Government spending and borrowing26.If a portfolio had a return of 10%, the risk free asset return was 4%, and the standard deviation of the portfolios excess returns was 25%
24、, the risk premium would be _.A.14%B.6%C.35%D.21%E.29%27.In words, the real rate of interest is approximately equal toA.the nominal rate minus the inflation rate.B.the inflation rate minus the nominal rate.C.the nominal rate times the inflation rate.D.the inflation rate divided by the nominal rate.E
25、.the nominal rate plus the inflation rate.28.If the Federal Reserve lowers the discount rate, ceteris paribus, the equilibrium levels of funds lent will _ and the equilibrium level of real interest rates will _.A.increase; increaseB.increase; decreaseC.decrease; increaseD.decrease; decreaseE.reverse
26、 direction from their previous trends29.What has been the relationship between T-Bill rates and inflation rates since the 1980s?A.The T-Bill rate was sometimes higher than and sometimes lower than the inflation rate.B.The T-Bill rate has equaled the inflation rate plus a constant percentage.C.The in
27、flation rate has equaled the T-Bill rate plus a constant percentage.D.The T-Bill rate has been higher than the inflation rate almost the entire period.E.The T-Bill rate has been lower than the inflation rate almost the entire period.30.Bracket Creep happens whenA.tax liabilities are based on real in
28、come and there is a negative inflation rate.B.tax liabilities are based on real income and there is a positive inflation rate.C.tax liabilities are based on nominal income and there is a negative inflation rate.D.tax liabilities are based on nominal income and there is a positive inflation rate.E.to
29、o many peculiar people make their way into the highest tax bracket.31.The holding-period return (HPR) for a stock is equal toA.the real yield minus the inflation rate.B.the nominal yield minus the real yield.C.the capital gains yield minus the tax rate.D.the capital gains yield minus the dividend yi
30、eld.E.the dividend yield plus the capital gains yield.32.The historical arithmetic rate of return on U.S. small stocks over the 19262009 period has been _. The standard deviation of small stocks returns has been _ than the standard deviation of large stocks returns.A.12.43%; lowerB.13.11%; lowerC.16
31、.24%; higherD.17.43%; higherE.21.53%; higherYou have been given this probability distribution for the holding-period return for Cheese, Inc stock:33.Assuming that the expected return on Cheeses stock is 14.35%, what is the standard deviation of these returns?A.4.72%B.6.30%C.4.38%D.5.74%E.6.67%34.An
32、investor purchased a bond 45 days ago for $985. He received $15 in interest and sold the bond for $980. What is the holding-period return on his investment?A.1.52%B.0.50%C.1.92%D.0.01%E.0.94%35.An investor purchased a bond 63 days ago for $980. He received $17 in interest and sold the bond for $987.
33、 What is the holding-period return on his investment?A.1.52%B.2.45%C.1.92%D.2.68%E.3.28%36.Over the past year you earned a nominal rate of interest of 8 percent on your money. The inflation rate was 3.5 percent over the same period. The exact actual growth rate of your purchasing power wasA.15.55%.B
34、.4.35%.C.5.02%.D.4.81%.E.15.04%.37.Over the past year you earned a nominal rate of interest of 14 percent on your money. The inflation rate was 2 percent over the same period. The exact actual growth rate of your purchasing power wasA.11.76%.B.16.00%.C.15.02%.D.14.32%.E.10.53%.38.Over the past year
35、you earned a nominal rate of interest of 12.5 percent on your money. The inflation rate was 2.6 percent over the same period. The exact actual growth rate of your purchasing power wasA.9.15%.B.9.90%.C.9.65%.D.10.52%.E.4.35%.39.A year ago, you invested $1,000 in a savings account that pays an annual
36、interest rate of 4%. What is your approximate annual real rate of return if the rate of inflation was 2% over the year?A.4%B.2%C.6%D.3%E.1%40.A year ago, you invested $10,000 in a savings account that pays an annual interest rate of 3%. What is your approximate annual real rate of return if the rate
37、 of inflation was 4% over the year?A.1%B.1%C.7%D.3%E.2%41.A year ago, you invested $2,500 in a savings account that pays an annual interest rate of 2.5%. What is your approximate annual real rate of return if the rate of inflation was 1.6% over the year?A.4.1%B.2.5%C.2.9%D.1.6%E.0.9%42.A year ago, y
38、ou invested $2,500 in a savings account that pays an annual interest rate of 2.5%. What is your approximate annual real rate of return if the rate of inflation was 3.4% over the year?A.0.9%B.0.9%C.5.9%D.3.4%E.1.2%43.A year ago, you invested $12,000 in an investment that produced a return of 16%. Wha
39、t is your approximate annual real rate of return if the rate of inflation was 2% over the year?A.18%B.2%C.16%D.15%E.14%44.If the annual real rate of interest is 3.5% and the expected inflation rate is 2.5%, the nominal rate of interest would be approximatelyA.3.5%.B.2.5%.C.1%.D.6.8%.E.6%.45.If the a
40、nnual real rate of interest is 2.5% and the expected inflation rate is 3.4%, the nominal rate of interest would be approximatelyA.4.9%.B.0.9%.C.0.9%.D.7%.E.5.9%.46.If the annual real rate of interest is 4% and the expected inflation rate is 3%, the nominal rate of interest would be approximatelyA.4%
41、.B.3%.C.1%.D.5%.E.7%.47.You purchased a share of stock for $12. One year later you received $0.25 as a dividend and sold the share for $12.92. What was your holding-period return?A.9.75%B.10.65%C.11.75%D.11.25%E.8.46%48.You purchased a share of stock for $120. One year later you received $1.82 as a
42、dividend and sold the share for $136. What was your holding-period return?A.15.67%B.22.12%C.18.85%D.13.24%E.14.85%49.You purchased a share of stock for $65. One year later you received $2.37 as a dividend and sold the share for $63. What was your holding-period return?A.0.57%B.0.2550%C.0.89%D.1.63%E
43、.0.46%You have been given this probability distribution for the holding-period return for a stock:50.What is the expected holding-period return for the stock?A.11.67%B.8.33%C.9.56%D.12.4%E.10.4%51.What is the expected standard deviation for the stock?A.2.07%B.9.96%C.7.04%D.1.44%E.12.17%52.What is th
44、e expected variance for the stock?A.142.07%B.189.96%C.177.04%D.128.17%E.148.04%53.Which of the following measures of risk best highlights the potential loss from extreme negative returns?A.Standard deviationB.VarianceC.Upper partial standard deviationD.Value at Risk (VaR)E.Sharpe measure54.Over the
45、past year you earned a nominal rate of interest of 3.6 percent on your money. The inflation rate was 3.1 percent over the same period. The exact actual growth rate of your purchasing power wasA.3.6%.B.3.1%.C.0.48%.D.6.7%.E.0.63%55.A year ago, you invested $1,000 in a savings account that pays an ann
46、ual interest rate of 4.3%. What is your approximate annual real rate of return if the rate of inflation was 3% over the year?A.4.3%B.1.3%C.7.3%D.3%E.1.3%56.If the annual real rate of interest is 3.5% and the expected inflation rate is 3.5%, the nominal rate of interest would be approximatelyA.0%.B.3.5%.C.12.25%.D.7%.E.2.6%.57.You purchased a share of CSCO stock for $20. One year later you received $2 as a dividend and sold the share f
