CH 10 Quiz 1. Last year, you purchased a stock at a price of $60.00 a share. Ove

Question

CH 10 Quiz

1.

Last year, you purchased a stock at a price of $60.00 a share. Over the course of the year, you received $2.90 in dividends and inflation averaged 3.4 percent. Today, you sold your shares for $65.60 a share. What is your approximate real rate of return on this investment?

12.7 percent

5.9 percent

17.6 percent

14.2 percent

10.8 percent

2.

A stock had returns of 9 percent, –7 percent, 5 percent, and 14 percent over the past 4 years. What is the standard deviation of this stock for the past four years?

3.

A stock has returns of 7 percent, 13 percent, 25 percent, and 18 percent for the past 4 years. Based on this information, what is the 95 percent probability range for any one given year?

Last year, you purchased a stock at a price of $60.00 a share. Over the course of the year, you received $2.90 in dividends and inflation averaged 3.4 percent. Today, you sold your shares for $65.60 a share. What is your approximate real rate of return on this investment?

Explanation / Answer

1)

Nominal return over past year:

= ($65.60+$2.90-$60)÷$60

= 14.17%

Nominal rate = Real rate+Inflation rate

14.17% = Real rate+3.4%

Real rate of return = 10.8%

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