FIN 501 CHAPTER (4,5,6) 2026 SPRING TEST QUESTIONS WITH ACCURATE SOLUTIONS
capital loss is computed by
A) subtracting the original cost of an investment from the proceeds received from the sale
of that investment minus any income from the investment.
B) subtracting the original cost of an investment from the proceeds received from the sale
of that investment plus any income from the investment.
C) subtracting the proceeds received from the sale of an investment from the original cost
of the investment.
D) subtracting the original cost of an investment from the proceeds received from the sale
of that investment.
D
Rational investor's are motivated to purchase an asset because of its
A) expected returns.
B) past returns.
C) emotional benefits.
D) all of the above.
A
The most predictable component of stock returns is
A) capital gains.
B) capital losses.
C) inflation adjusted return.
D) dividend income.
,D
Kelly bought a stock at a price of $22.50. She received a $1.75 dividend and sold the stock
for $24.75. What is Kelly's capital gain on this investment?
A) $4.00
B) $3.75
C) $2.25
D) $1.75
C
Ashley purchased a stock at a price of $27 a share. She received quarterly dividends of
$0.75 per share. After one year, Ashley sold the stock at a price of $29.25 a share. What is
her percentage holding period return on this investment?
A) 10.3%
B) 11.1%
C) 17.9%
D) 19.4%
D
Inflation tends to have a particularly negative impact on the price of
A) real estate.
B) bonds.
C) gold.
D) crude oil.
,B
Historically, what is the correct ranking of the following securities from lowest rate of return
to the
highest?
A) Short-term government bills, long-term government bonds, stocks.
B) Long-term government bonds, short-term government bills, stocks.
C) Stocks, short-term government bills, long-term government bonds.
D) Historical returns do not exhibit a consistent pattern.
A
Which of the following internal characteristics should cause investors to expect the highest
rate of return?
A) a steady record of past dividends
B) interest and principal guaranteed by the U.S. government
C) a record of excellent management and consistent dividend payments
D) poor management and excessive use of debt financing
D
Which of the following investments may be impacted by government actions?
A) stocks
B) corporate bonds
C) government bonds
D) all of the above
, D
Over the long term, which one of the following has historically had the lowest risk and
lowest average annual rate of return?
A) common stock
B) long-term government bonds
C) real-estate
D) corporate bonds
B
A holding period return is calculated by adding the current income to the capital gains and
dividing this sum by the
A) average investment value.
B) beginning investment value.
C) total income received.
D) selling price of the investment.
B
Lauren purchased a stock for $28 a share and sold it six months later for $31. While she
owned the stock, Lauren received two quarterly dividends of $0.35 per share. Brittany's
holding period return on this stock is
A) 13.2%.
B) 10.7%.
C) 11.9%.
D) 26.4%.
capital loss is computed by
A) subtracting the original cost of an investment from the proceeds received from the sale
of that investment minus any income from the investment.
B) subtracting the original cost of an investment from the proceeds received from the sale
of that investment plus any income from the investment.
C) subtracting the proceeds received from the sale of an investment from the original cost
of the investment.
D) subtracting the original cost of an investment from the proceeds received from the sale
of that investment.
D
Rational investor's are motivated to purchase an asset because of its
A) expected returns.
B) past returns.
C) emotional benefits.
D) all of the above.
A
The most predictable component of stock returns is
A) capital gains.
B) capital losses.
C) inflation adjusted return.
D) dividend income.
,D
Kelly bought a stock at a price of $22.50. She received a $1.75 dividend and sold the stock
for $24.75. What is Kelly's capital gain on this investment?
A) $4.00
B) $3.75
C) $2.25
D) $1.75
C
Ashley purchased a stock at a price of $27 a share. She received quarterly dividends of
$0.75 per share. After one year, Ashley sold the stock at a price of $29.25 a share. What is
her percentage holding period return on this investment?
A) 10.3%
B) 11.1%
C) 17.9%
D) 19.4%
D
Inflation tends to have a particularly negative impact on the price of
A) real estate.
B) bonds.
C) gold.
D) crude oil.
,B
Historically, what is the correct ranking of the following securities from lowest rate of return
to the
highest?
A) Short-term government bills, long-term government bonds, stocks.
B) Long-term government bonds, short-term government bills, stocks.
C) Stocks, short-term government bills, long-term government bonds.
D) Historical returns do not exhibit a consistent pattern.
A
Which of the following internal characteristics should cause investors to expect the highest
rate of return?
A) a steady record of past dividends
B) interest and principal guaranteed by the U.S. government
C) a record of excellent management and consistent dividend payments
D) poor management and excessive use of debt financing
D
Which of the following investments may be impacted by government actions?
A) stocks
B) corporate bonds
C) government bonds
D) all of the above
, D
Over the long term, which one of the following has historically had the lowest risk and
lowest average annual rate of return?
A) common stock
B) long-term government bonds
C) real-estate
D) corporate bonds
B
A holding period return is calculated by adding the current income to the capital gains and
dividing this sum by the
A) average investment value.
B) beginning investment value.
C) total income received.
D) selling price of the investment.
B
Lauren purchased a stock for $28 a share and sold it six months later for $31. While she
owned the stock, Lauren received two quarterly dividends of $0.35 per share. Brittany's
holding period return on this stock is
A) 13.2%.
B) 10.7%.
C) 11.9%.
D) 26.4%.
