University:
Binghamton University
Course:
FIN 311 | Financial Management
Academic year:

2023
Views:

141

Pages:

3
Author:

Derick Farley

The greater (greater/lower) the risk, the greater the required return. When a company declares a dividend, shareholders generally receive cash. The dividend yield for a 1-year period is equal to the annual dividend amount divided by the beginning stock price. Which of the following is commonly used to measure inflation? The Consumer Price Index (CPI) The Ibbotson-Sinquefield data show that over the long-term, ___. small-company stocks generated the highest average return small-company stocks had the highest risk level T-bills, which had the lowest risk, generated the lowest return Studying market history can reward us by demonstrating that _____. the greater the potential reward is, the greater the risk on average, investors will earn a reward for bearing risk Normally, the excess rate of return on risky assets is positive. Dividends are the income component of the total return from investing in a stock. The dividend yield is defined as the annual dividend amount divided by the beginning stock price. The square of the standard deviation is equal to the variance. Which of the following are true? T-bills sometimes outperform common stocks. Common stocks may experience negative returns. The excess rate of return is the difference between risky returns and risk-free returns. The sharpe ratio is calculated as the risk premium of the asset divided by the standard deviation. Variance is measured in percent squared, while standard deviation is measured in percent. The Ibbotson-Sinquefield data shows that ___. U.S. T-bills had the lowest risk or variability long-term corporate bonds had less risk or variability than stocks A normal distribution has a symmetrical shape. The excess return on a risky asset is the difference between the risky return and the risk-free rate. The second lesson from studying capital market history is that risk is handsomely rewarded. The Sharpe ratio measures reward to risk. Mona Corporation has a variance of returns of 343, while Scott Corporation has a variance of returns of 898. Which company's actual returns vary more from their mean return? Scott Corporation Arrange the following investments from highest to lowest return based on what our study of capital market history has revealed about risk premiums. 1. Small company common stock 2. Long term corporate bonds 3. US Treasury bills Which of the following are needed to describe the distribution of stock returns? The standard deviation of returns The mean return The second lesson from capital market history is that there is a direct link between risk and reward. A projected IRR on a risky investment in the 10 to 20 percent range is not unusual. In an efficient market: assets are priced at the present value of their future cash flows all investments are zero NPV investments

Financial Management - Chapter 12

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