Fundamentals of Investments: Valuation and Management 9th Edition by Bradford Jordan test bank

Award: 1.00 point
Big Town Markets common stock returned 14.3, 12.5, 9.9, 6.5, and 11.1 percent, respectively, over the
past five years. What is the arithmetic average return?
10.86%
11.04%
11.66%
12.20%
13.80%
Return = (.143 + .125 + .099 + .065 + .111) / 5 = .1086, or 10.86%
References
Multiple Choice Learning Objective:
01-01 How to
calculate the return
on an investment
using different
methods.
Difficulty: 1 Easy Section: 1.5 More on
Average Returns
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 77.
Award: 1.00 point
Over the past four years, Hi-Tech Development stock returned 35.2, 38.8, 18.4, and 鈭�32.2
percent annually. What is the arithmetic average return?
15.05%
17.67%
20.53%
24.20%
32.25%
Return = (.352 + .388 + .184 鈭� .322) / 4 = .1505, or 15.05%
References
Multiple Choice Learning Objective:
01-01 How to
calculate the return
on an investment
using different
methods.
Difficulty: 1 Easy Section: 1.5 More on
Average Returns
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 78.
Award: 1.00 point
You own a stock that has produced an arithmetic average return of 8.6 percent over the past five
years. The annual returns for the first four years were 16, 11, −19, and 3 percent, respectively. What
was the rate of return on the stock in year five?
−5.00%
2.75%
6.25%
28.00%
32.00%
Total return = .086 × 5 = .43
Year 5 return = .43 − (.16 + .11 − .19 + .03) = .32, or 32%
References
Multiple Choice Learning Objective:
01-01 How to
calculate the return
on an investment
using different
methods.
Difficulty: 1 Easy Section: 1.5 More on
Average Returns
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 79.
Award: 1.00 point
An asset had annual returns of 17, 鈭�35, 鈭�18, 24, and 6 percent, respectively, over the past five
years. What is the arithmetic average return?
鈭�1.2%
.8%
1.2%
1.6%
2.3%
Average = (.17 鈭� .35 鈭� .18 + .24 + .06) / 5 = 鈭�.012, or 鈭�1.2%
References
Multiple Choice Learning Objective:
01-01 How to
calculate the return
on an investment
using different
methods.
Difficulty: 1 Easy Section: 1.5 More on
Average Returns
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 80.
Award: 1.00 point
Celsius stock had year-end prices of $42, $37, $44, and $46 over the past four years, respectively.
What is the arithmetic average rate of return?
3.17%
3.85%
4.28%
10.63%
11.79%
Annual returns are: ($37 − $42) / $42 = −.119048;($44 − $37) / $37 = .189189;
($46 − $44) / $44 = .045455
Average = (−.119048 + .189189 + .045455) / 3 = .0385, or 3.85 percent
References
Multiple Choice Learning Objective:
01-01 How to
calculate the return
on an investment
using different
methods.
Difficulty: 1 Easy Section: 1.5 More on
Average Returns
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 81.
Award: 1.00 point
Blackstone Mines stock returned 10.5, 17.2, −9.0, and 14.5 percent over the past four years,
respectively. What is the geometric average return?
5.84%
6.36%
7.78%
9.94%
10.33%
Geometric average = [(1 + .105)(1 + .172)(1 − .090)(1 + .145)] 1 / 4 − 1 =
.0778, or 7.78%
References
Multiple Choice Learning Objective:
01-01 How to
calculate the return
on an investment
using different
methods.
Difficulty: 1 Easy Section: 1.5 More on
Average Returns
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 82.
Award: 1.00 point
You invested $6,000 six years ago. The arithmetic average return on your investment is 9.3 percent
and the geometric average return is 9.57 percent. What is the value of your portfolio today?
$10,092
$10,382
$10,899
$10,947
$11,195
FV = $6,000 × (1 + .0957) 6 = $10,382
References
Multiple Choice Learning Objective:
01-01 How to
calculate the return
on an investment
using different
methods.
Difficulty: 1 Easy Section: 1.5 More on
Average Returns
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 83.
Award: 1.00 point
Joanne invested $15,000 six years ago. Her arithmetic average return on this investment is 8.72
percent, and her geometric average return is 8.50 percent. What is Joanne's portfolio worth today?
$23,989
$24,472
$26,409
$26,514
$26,766
FV = $15,000 × (1 + .085) 6 = $24,472.01
References
Multiple Choice Learning Objective: