BUL 4310 The Legal Environment of Business FINAL EXAM COMPREHENSIVE POSSIBLE QUESTIONS AND
ANSWERS 2026 Florida International University
Chapter 1: A Brief History of Risk and Return
Chapter 2: The Investment Process
Chapter 3: Overview of Security Types
Chapter 4: Mutual Funds and Other Investment Companies
Chapter 5: The Stock Market
Chapter 6: Common Stock Valuation
Chapter 7: Stock Price Behavior and Market Efficiency
Chapter 8: Behavioral Finance and the Psychology of Investing
Chapter 9: Interest Rates
Chapter 10: Bond Prices and Yields
, Chapter 1 – A Brief History of Risk and Return
Question 1
5 out of 5 points
The standard deviation is a measure of:
Selected Answer: volatility.
Question 2
5 out of 5 points
You purchased a stock eight months ago for $36 a share. Today, you sold that stock for $41.50 a share.
The stock pays no dividends. What was your annualized rate of return?
Selected Answer: 23.32 percent
Question 3
5 out of 5 points
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?
Selected Answer: .00770
Question 4
5 out of 5 points
Big Town Markets common stock returned 13.8, 14.2, 9.7, 5.3, and 12.2 percent, respectively, over the past five
years. What is the arithmetic average return?
Selected Answer: 11.04 percent
Question 5
5 out of 5 points
You own a stock that has produced an arithmetic average return of 7.8 percent over the past five years. The
annual returns for the first four years were 16, 11, -19, and 3 percent, respectively.
What was the rate of return on the stock in year five?
Selected Answer: 28.00 percent
Question 6
5 out of 5 points
The geometric return on a stock over the past 10 years was 7.9 percent. The arithmetic return over the same
period was 8.8 percent. What is the best estimate of the average return on this stock over the next 5 years?
Selected Answer: 8.40 percent
Question 7
5 out of 5 points
Which category(ies) of investments had an annual rate of return that exceeded 100 percent for at least one year
during the period 1926-2012?
Selected Answer: only small-company stocks
Question 8
5 out of 5 points
Jim began his investing program with a $4,000 initial investment. The table below recaps his returns each year
, as well as the amounts he added to his investment account. What is his dollar-weighted average return?
Selected Answer: 2.6 percent
Question 9
5 out of 5 points
If you multiply the number of shares of outstanding stock for a firm by the price per share, you are computing
the firm's:
Selected Answer: market capitalization.
Question 10
5 out of 5 points
Jeremy owns a stock that has historically returned 7.5 percent annually with a standard deviation of 10.2 percent.
There is only a 0.5 percent chance that the stock will produce a return greater than percent in any one
year.
Selected Answer: 38.1
Question 11
5 out of 5 points
A stock produced annual returns of 5, -21, 11, 42, and 4 percent over the past five years, respectively. What is
the geometric average return?
Selected Answer: 6.34 percent
Question 12
5 out of 5 points
Tom decides to begin investing some portion of his annual bonus, beginning this year with $6,000. In the first
year he earns a 8% return and adds $3,000 to his investment. In the second his portfolio loses 4% but, sticking to
his plan, he adds $1,000 to his portfolio. In this year his portfolio returns 2%. What is Tom's dollar-weighted
average return on his investments?
Selected Answer: 1.20 percent
Question 13
5 out of 5 points
Which one of the following statements is correct concerning the dividend yield and the total return?
Selected Answer: The total return can be negative but the dividend yield cannot be negative.
Question 14
5 out of 5 points
Jim began his investing program with a $4050 initial investment. The table below recaps his returns each year as
well as the amounts he added to his investment account. What is his dollar-weighted average return?
Selected Answer: 2.0 percent
, Question 15
5 out of 5 points
Which one of the following statements is correct?
Selected Answer: The variance is a means of measuring the volatility of returns on an investment.
Question 16
5 out of 5 points
The wider the distribution of an investment's returns over time, the the expected average rate of return
and the the expected volatility of those returns.
Selected Answer: higher; higher
Question 17
5 out of 5 points
One year ago, you purchased 300 shares of Southern Cotton at $32.60 a share. During the past year, you
received a total of $280 in dividends. Today, you sold your shares for $35.80 a share.
What is your total return on this investment?
Selected Answer: 12.68 percent
Question 18
5 out of 5 points
The average compound return earned per year over a multi-year period when inflows and outflows are
considered is called the:
Selected Answer: dollar-weighted average return.
Question 19
5 out of 5 points
A portfolio had an original value of $7,400 seven years ago. The current value of the portfolio is $11,898. What
is the average geometric return on this portfolio?
Selected Answer: 7.02 percent
Question 20
5 out of 5 points
Which one of the following had the highest risk premium for the period 1926-2012?
Selected Answer: small-company stocks
ANSWERS 2026 Florida International University
Chapter 1: A Brief History of Risk and Return
Chapter 2: The Investment Process
Chapter 3: Overview of Security Types
Chapter 4: Mutual Funds and Other Investment Companies
Chapter 5: The Stock Market
Chapter 6: Common Stock Valuation
Chapter 7: Stock Price Behavior and Market Efficiency
Chapter 8: Behavioral Finance and the Psychology of Investing
Chapter 9: Interest Rates
Chapter 10: Bond Prices and Yields
, Chapter 1 – A Brief History of Risk and Return
Question 1
5 out of 5 points
The standard deviation is a measure of:
Selected Answer: volatility.
Question 2
5 out of 5 points
You purchased a stock eight months ago for $36 a share. Today, you sold that stock for $41.50 a share.
The stock pays no dividends. What was your annualized rate of return?
Selected Answer: 23.32 percent
Question 3
5 out of 5 points
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?
Selected Answer: .00770
Question 4
5 out of 5 points
Big Town Markets common stock returned 13.8, 14.2, 9.7, 5.3, and 12.2 percent, respectively, over the past five
years. What is the arithmetic average return?
Selected Answer: 11.04 percent
Question 5
5 out of 5 points
You own a stock that has produced an arithmetic average return of 7.8 percent over the past five years. The
annual returns for the first four years were 16, 11, -19, and 3 percent, respectively.
What was the rate of return on the stock in year five?
Selected Answer: 28.00 percent
Question 6
5 out of 5 points
The geometric return on a stock over the past 10 years was 7.9 percent. The arithmetic return over the same
period was 8.8 percent. What is the best estimate of the average return on this stock over the next 5 years?
Selected Answer: 8.40 percent
Question 7
5 out of 5 points
Which category(ies) of investments had an annual rate of return that exceeded 100 percent for at least one year
during the period 1926-2012?
Selected Answer: only small-company stocks
Question 8
5 out of 5 points
Jim began his investing program with a $4,000 initial investment. The table below recaps his returns each year
, as well as the amounts he added to his investment account. What is his dollar-weighted average return?
Selected Answer: 2.6 percent
Question 9
5 out of 5 points
If you multiply the number of shares of outstanding stock for a firm by the price per share, you are computing
the firm's:
Selected Answer: market capitalization.
Question 10
5 out of 5 points
Jeremy owns a stock that has historically returned 7.5 percent annually with a standard deviation of 10.2 percent.
There is only a 0.5 percent chance that the stock will produce a return greater than percent in any one
year.
Selected Answer: 38.1
Question 11
5 out of 5 points
A stock produced annual returns of 5, -21, 11, 42, and 4 percent over the past five years, respectively. What is
the geometric average return?
Selected Answer: 6.34 percent
Question 12
5 out of 5 points
Tom decides to begin investing some portion of his annual bonus, beginning this year with $6,000. In the first
year he earns a 8% return and adds $3,000 to his investment. In the second his portfolio loses 4% but, sticking to
his plan, he adds $1,000 to his portfolio. In this year his portfolio returns 2%. What is Tom's dollar-weighted
average return on his investments?
Selected Answer: 1.20 percent
Question 13
5 out of 5 points
Which one of the following statements is correct concerning the dividend yield and the total return?
Selected Answer: The total return can be negative but the dividend yield cannot be negative.
Question 14
5 out of 5 points
Jim began his investing program with a $4050 initial investment. The table below recaps his returns each year as
well as the amounts he added to his investment account. What is his dollar-weighted average return?
Selected Answer: 2.0 percent
, Question 15
5 out of 5 points
Which one of the following statements is correct?
Selected Answer: The variance is a means of measuring the volatility of returns on an investment.
Question 16
5 out of 5 points
The wider the distribution of an investment's returns over time, the the expected average rate of return
and the the expected volatility of those returns.
Selected Answer: higher; higher
Question 17
5 out of 5 points
One year ago, you purchased 300 shares of Southern Cotton at $32.60 a share. During the past year, you
received a total of $280 in dividends. Today, you sold your shares for $35.80 a share.
What is your total return on this investment?
Selected Answer: 12.68 percent
Question 18
5 out of 5 points
The average compound return earned per year over a multi-year period when inflows and outflows are
considered is called the:
Selected Answer: dollar-weighted average return.
Question 19
5 out of 5 points
A portfolio had an original value of $7,400 seven years ago. The current value of the portfolio is $11,898. What
is the average geometric return on this portfolio?
Selected Answer: 7.02 percent
Question 20
5 out of 5 points
Which one of the following had the highest risk premium for the period 1926-2012?
Selected Answer: small-company stocks
