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

in large-company stocks rather than long-term corporate bonds over those ten years?
1.7%
3.7%
4.2%
4.6%
6.4%
Additional risk premium = (.087 − .025) − (.041 − .025) = .0460, or 4.60%
References
Multiple Choice Learning Objective:
01-03 The historical
risks on various
important types of
investments.
Difficulty: 1 Easy Section: 1.3 Average
Returns: The First
Lesson
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 64.
Award: 1.00 point
An asset had annual returns of 12, 18, 6, −9, and 5 percent, respectively, for the last five years. What
is the variance of these returns?
.00810
.01013
.01065
.02038
.04052
Mean = (.12 + .18 + .06 − .09 + .05) / 5 = .064
Var = [(.12 − .064) 2 + (.18 − .064) 2 + (.06 − .064) 2 + (−.09 − .064) 2 +
(.05 − .064) 2 ] / (5 − 1) = .01013
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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 
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 65.
Award: 1.00 point
Over the past five years, Southwest Railway stock had annual returns of 10, 14, −6, 7.5, and 16
percent, respectively. What is the variance of these returns?
.00548
.00685
.00750
.01370
.02740
Mean = (.10 + .14 − .06 + .075 + .16) / 5 = .0830
Var = [(.10 − .083) 2 + (.14 − .083) 2 + (−.06 − .083) 2 + (.075 − .083) 2 +
(.16 − .083) 2 ] / (5 − 1) = .00750
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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
 


 66.
Award: 1.00 point
An asset had returns of 7.7, 5.4, 3.6, −4.2, and −1.3 percent, respectively, over the past five years.
What is the variance of these returns?
.00173
.00184
.00216
.00239
.00259
Mean = (.077 + .054 + .036 − .042 − .013) / 5 = .0224
Var = [(.077 − .0224) 2 + (.054 − .0224) 2 + (.036 − .0224) 2 + (−.042 −
.0224) 2 + (−.013 − .0224) 2 ] / (5 − 1) = .00239
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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

 

 67.
Award: 1.00 point
An asset had annual returns of 13, 10, −14, 3, and 36 percent, respectively, for the past five years.
What is the standard deviation of these returns?
8.96%
16.05%
17.92%
18.09%
20.03%
Mean = (.13 + .10 − .14 + .03 + .36) / 5 = .096
Var = [(.13 − .096) 2 + (.10 − .096) 2 + (−.14 − .096) 2 + (.03 − .096) 2 +
(.36 − .096) 2 ] / (5 − 1) = .032730
Std Dev = √ (.032730) = .1809, or 18.09%
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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

 

 68.
Award: 1.00 point
Over the past four years, a stock produced returns of 13, 6, −5, and 18 percent, respectively. What is
the standard deviation of these returns?
8.63%
9.93%
9.97%
10.11%
10.15%
Mean = (.13 + .06 − .05 + .18) / 4 = .08
Var = [(.13 − .08) 2 + (.06 − .08) 2 + (−.05 − .08) 2 + (.18 − .08) 2 ] / (4 −
1) = .009933
Std Dev = √ (.009933) = .997, or 9.97%
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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
 


 69.
Award: 1.00 point
Downtown Industries common stock had returns of 7.2, 11.5, 10.5, and 7.5 percent, respectively, over
the past four years. What is the standard deviation of these returns?
2.15%
2.38%
2.41%
2.59%
2.82%
Mean = (.072 + .115 + .105 + .075) / 4 = .0918
Var = [(.072 − .0918) 2 + (.115 − .0918) 2 + (.105 − .0918) 2 + (.075 −
.0918) 2 ] / (4 − 1) = .000462
Std Dev = √ (.000462) = .215, or 2.15%
References
Multiple Choice Learning Objective: