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

a normal distribution.
50
68
82
90
95
See Section 1.4
References
Multiple Choice Learning Objective:
01-03 The historical
risks on various
important types of
investments.
Difficulty: 1 Easy Section: 1.4 Return
Variability: The
Second Lesson
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 35.
Award: 1.00 point
Assume you own a portfolio that is invested 50 percent in large-company stocks and 50 percent in
corporate bonds. If you want to increase the potential annual return on this portfolio, you could:
decrease the investment in stocks and increase the investment in bonds.
replace the corporate bonds with intermediate-term government bonds.
replace the corporate bonds with Treasury bills.
increase the standard deviation of the portfolio.
reduce the expected volatility of the portfolio.
See Section 1.4
References
Multiple Choice Learning Objective:
01-04 The
relationship
between risk and
return.
Difficulty: 2
Medium
Section: 1.4 Return
Variability: The
Second Lesson
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 36.
Award: 1.00 point
Which one of the following statements is correct?
The standard deviation of the returns on Treasury bills is zero.
Large-company stocks are historically riskier than small-company stocks.
The standard deviation is a means of measuring the volatility of returns on an investment.
A risky asset will always have a higher annual rate of return than a riskless asset.
There is an indirect relationship between risk and return.
See Section 1.4
References
Multiple Choice Learning Objective:
01-04 The
relationship
between risk and
return.
Difficulty: 2
Medium
Section: 1.4 Return
Variability: The
Second Lesson
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 37.
Award: 1.00 point
The wider the distribution of an investment's returns over time, the ________ the expected average
rate of return and the ________ the expected volatility of those returns.
higher; higher
higher; lower
lower; higher
lower; lower
The distribution of returns does not affect the expected average rate of return.
See Section 1.4
References
Multiple Choice Learning Objective:
01-04 The
relationship
between risk and
return.
Difficulty: 1 Easy Section: 1.4 Return
Variability: The
Second Lesson
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 38.
Award: 1.00 point
Which one of the following should be used as the mean return when you are defining the normal
distribution of an investment's annual rates of return?
arithmetic average return for the period
geometric average return for the period
total return for the period divided by N 鈭� 1
arithmetic average return for the period divided by N 鈭� 1
geometric average return for the period divided by N 鈭� 1
See Section 1.4
References
Multiple Choice Learning Objective:
01-03 The historical
risks on various
important types of
investments.
Difficulty: 1 Easy Section: 1.4 Return
Variability: The
Second Lesson
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 39.
Award: 1.00 point
The geometric mean return on large-company stocks for the 1926-2018 period:
is approximately equal to the arithmetic mean return plus one-half of the standard
deviation.
exceeds the arithmetic mean return.
is approximately equal to the arithmetic mean return minus one-half of the standard
deviation.
is approximately equal to the arithmetic mean return plus one-half of the variance.
is less than the arithmetic mean return.
See Section 1.5
References
Multiple Choice Learning Objective:
01-02 The historical
returns on various
important types of
investments.
Difficulty: 1 Easy Section: 1.5 More on
Average Returns
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 40.
Award: 1.00 point
You have owned a stock for seven years. The geometric average return on this investment for those
seven years is positive even though the annual rates of return have varied significantly. Given this,
you know the arithmetic average return for the period is:
positive but less than the geometric average return.
less than the geometric return and could be negative, zero, or positive.
equal to the geometric average return.
either equal to or greater than the geometric average return.
greater than the geometric average return.
See Section 1.5
References
Multiple Choice Learning Objective:
01-01 How to
calculate the return
on an investment
using different