2026 CORPORATE FINANCE - FINAL
EXAM QUESTIONS AND ANSWERS
LATEST EDITION
Which one of the following best defines the variance of an investment's annual
returns over a number of years?
A. The average squared difference between the arithmetic and the geometric
average annual returns.
B. The squared summation of the differences between the actual returns and the
average geometric return.
C. The average difference between the annual returns and the average return for
the period.
D. The difference between the arithmetic average and the geometric average
return for the period.
,E. The average squared difference between the actual returns and the arithmetic
average return. - CORRECT ANSWER (S) -The average squared difference between
the actual returns and the arithmetic average return.
Standard deviation is a measure of which one of the following?
A. average rate of return
B. volatility
C. probability
D. risk premium
E. real returns - CORRECT ANSWER (S) -volatility
Which one of the following is defined by its mean and its standard deviation?
A. arithmetic nominal return
B. geometric real return
,C. normal distribution
D. variance
E. risk premium - CORRECT ANSWER (S) -normal distribution
The average compound return earned per year over a multi-year period is called
the _____ average return.
A. arithmetic
B. standard
C. variant
D. geometric
E. real - CORRECT ANSWER (S) -geometric
5. Which of the following statements is correct in relation to a stock investment?
I. The capital gains yield can be positive, negative, or zero.
II. The dividend yield can be positive, negative, or zero.
, III. The total return can be positive, negative, or zero.
IV. Neither the dividend yield nor the total return can be negative. - CORRECT
ANSWER (S) -I and III only
The real rate of return on a stock is approximately equal to the nominal rate of
return:
A. multiplied by (1 + inflation rate).
B. plus the inflation rate.
C. minus the inflation rate.
D. divided by (1 + inflation rate).
E. divided by (1- inflation rate). - CORRECT ANSWER (S) -minus the inflation rate.
7. Which one of the following statements is correct?
A. The greater the volatility of returns, the greater the risk premium.
B. The lower the volatility of returns, the greater the risk premium.
EXAM QUESTIONS AND ANSWERS
LATEST EDITION
Which one of the following best defines the variance of an investment's annual
returns over a number of years?
A. The average squared difference between the arithmetic and the geometric
average annual returns.
B. The squared summation of the differences between the actual returns and the
average geometric return.
C. The average difference between the annual returns and the average return for
the period.
D. The difference between the arithmetic average and the geometric average
return for the period.
,E. The average squared difference between the actual returns and the arithmetic
average return. - CORRECT ANSWER (S) -The average squared difference between
the actual returns and the arithmetic average return.
Standard deviation is a measure of which one of the following?
A. average rate of return
B. volatility
C. probability
D. risk premium
E. real returns - CORRECT ANSWER (S) -volatility
Which one of the following is defined by its mean and its standard deviation?
A. arithmetic nominal return
B. geometric real return
,C. normal distribution
D. variance
E. risk premium - CORRECT ANSWER (S) -normal distribution
The average compound return earned per year over a multi-year period is called
the _____ average return.
A. arithmetic
B. standard
C. variant
D. geometric
E. real - CORRECT ANSWER (S) -geometric
5. Which of the following statements is correct in relation to a stock investment?
I. The capital gains yield can be positive, negative, or zero.
II. The dividend yield can be positive, negative, or zero.
, III. The total return can be positive, negative, or zero.
IV. Neither the dividend yield nor the total return can be negative. - CORRECT
ANSWER (S) -I and III only
The real rate of return on a stock is approximately equal to the nominal rate of
return:
A. multiplied by (1 + inflation rate).
B. plus the inflation rate.
C. minus the inflation rate.
D. divided by (1 + inflation rate).
E. divided by (1- inflation rate). - CORRECT ANSWER (S) -minus the inflation rate.
7. Which one of the following statements is correct?
A. The greater the volatility of returns, the greater the risk premium.
B. The lower the volatility of returns, the greater the risk premium.
