CHAP10

The excess return required from a risky asset over that required from a risk-free asset is called the:

• risk premium.

• geometric premium.

• excess return.

• average return.

• variance.

The average squared difference between the actual return and the average return is called the:

• volatility return.

• variance.

• standard deviation.

• risk premium.

• excess return.

The standard deviation for a set of stock returns can be calculated as the:

• positive square root of the average return.

• average squared difference between the actual return and the average return.

• positive square root of the variance.

• average return divided by N minus one, where N is the number of returns.

• variance squared.

A symmetric, bell-shaped frequency distribution that is completely defined by its mean and standard deviation is the _____ distribution.

• gamma

• Poisson

• bi-modal

• normal

• uniform

The average compound return earned per year over a multi-year period is called the _____ average return.

• arithmetic

• standard

• variant

• geometric

• real

The return earned in an average year over a multi-year period is called the _____ average return.

• arithmetic

• standard

• variant

• geometric

• real

The excess return you earn by moving from a relatively risk-free investment to a risky investment is called the:

• geometric average return.

• inflation premium.

• risk premium.

• time premium.

• arithmetic average return.

The capital gains yield plus the dividend yield on a security is called the:

• variance of returns.

• geometric return.

• average period return.

• current yield.

• total return.

A portfolio of large company stocks would contain which one of the following types of securities?

• stocks of the firms which represent the smallest 20% of the companies listed on the NYSE

• U.S. Treasury bills

• long-term corporate bonds

• stocks of firms included in the S&P 500 index

• long-term government bonds

Based on the period of 1926 through 2011, _____ have tended to outperform other securities over the long-term.

• U.S. Treasury bills

• large company stocks

• long-term corporate bonds

• small company stocks

• long-term government bonds