FIN 3400 CH. 9 | QUESTIONS AND ANSWERS | 2026 |
ALREADY PASSED.
Which of these best summarizes market performance for the period 1950-
2012? Answer - The returns on the S&P 500 were more volatile than long-term
Treasury bond returns but produced a higher average return in the long-run
What does standard deviation measure? Answer - Total Risk
For the past three years, a stock had annual returns of 14 percent, -32 percent,
and 4 percent. What is the average arithmetic return? Answer - -4.67
What benefit is derived from the use of standard deviation when measuring
rates of return? Answer - Standard deviation quantifies total risk with higher
values representing greater risk.
What is a geometric mean return? Answer - The equivalent return that is
compounded for N periods
Which one of these is correct regarding the standard deviation formula?
Answer - The deviations must be squared to eliminate all negative values.
Which rate of return best illustrates the historical performance of a security
over time? Answer - Geometric mean return
, How can you best describe the relationship between the performance of long-
term Treasury bonds and the S&P 500 during the period 2000-2012? Answer -
When one asset class incurred a loss, the other class had a positive rate of
return.
How is standard deviation defined in relation to investments? Answer -
Measure of past return volatility, or risk
Standard deviation squared is known as Answer - Variance
Which of these statements regarding the standard deviation formula is correct?
Select all that apply. Answer - (N - 1) is used when computing historical
standard deviations.
N is the total number of returns.
The average return is an arithmetic average.
The variance of the returns on an individual stock is 0.060565. What is the
standard deviation? Answer - 24.61 percent
Which rate of return is most appropriate for statistical analysis and represents
the expected return in any given year? Answer - Arithmetic average return
Based on actual performance for the period 1950-2017, which one of the
following displayed the least amount of risk and why? Select the best answer.
Answer - T-bills as their returns were less volatile.
Based on returns and their volatility for the period 1950-2012, what can be
implied about the risk level of long-term Treasury bonds? Answer - Long-term
Treasury bonds are riskier than Treasury bills
ALREADY PASSED.
Which of these best summarizes market performance for the period 1950-
2012? Answer - The returns on the S&P 500 were more volatile than long-term
Treasury bond returns but produced a higher average return in the long-run
What does standard deviation measure? Answer - Total Risk
For the past three years, a stock had annual returns of 14 percent, -32 percent,
and 4 percent. What is the average arithmetic return? Answer - -4.67
What benefit is derived from the use of standard deviation when measuring
rates of return? Answer - Standard deviation quantifies total risk with higher
values representing greater risk.
What is a geometric mean return? Answer - The equivalent return that is
compounded for N periods
Which one of these is correct regarding the standard deviation formula?
Answer - The deviations must be squared to eliminate all negative values.
Which rate of return best illustrates the historical performance of a security
over time? Answer - Geometric mean return
, How can you best describe the relationship between the performance of long-
term Treasury bonds and the S&P 500 during the period 2000-2012? Answer -
When one asset class incurred a loss, the other class had a positive rate of
return.
How is standard deviation defined in relation to investments? Answer -
Measure of past return volatility, or risk
Standard deviation squared is known as Answer - Variance
Which of these statements regarding the standard deviation formula is correct?
Select all that apply. Answer - (N - 1) is used when computing historical
standard deviations.
N is the total number of returns.
The average return is an arithmetic average.
The variance of the returns on an individual stock is 0.060565. What is the
standard deviation? Answer - 24.61 percent
Which rate of return is most appropriate for statistical analysis and represents
the expected return in any given year? Answer - Arithmetic average return
Based on actual performance for the period 1950-2017, which one of the
following displayed the least amount of risk and why? Select the best answer.
Answer - T-bills as their returns were less volatile.
Based on returns and their volatility for the period 1950-2012, what can be
implied about the risk level of long-term Treasury bonds? Answer - Long-term
Treasury bonds are riskier than Treasury bills
