FIN 400 Exam 1 with Questions and
Answers
The total dollar return on a share of stock is defined as the: ANSWER capital gain or loss
plus any dividend income.
The capital gains yield is equal to: ANSWER (Pt + 1 − Pt)/Pt.
The rate of return earned on a U.S. Treasury bill is frequently used as a proxy for the:
ANSWER risk-free rate.
The standard deviation is a measure of: ANSWER volatility.
The average compound return earned per year over a multi-year period is called the:
ANSWER geometric average return.
Which one of the following statements is correct concerning the dividend yield and the total
return? ANSWER The total return can be negative but the dividend yield cannot be negative.
If you multiply the number of shares outstanding for a stock by the price per share, you are
computing the firm's: ANSWER market capitalization.
Which one of the following is considered the best method of comparing the returns on
various-sized investments? ANSWER percentage return
You purchased a stock for $30.43 a share, received a dividend of $.70 per share, and sold the
stock after one year for $30.22 a share. What was your dividend yield on this investment?
ANSWER 2.30%
, Explanation:
$.70 / $30.43 = .0230, or 2.30%
One year ago, you purchased 500 shares of stock at a cost of $10,500. The stock paid an
annual dividend of $1.10 per share. Today, you sold those shares for $23.90 each. What is the
capital gains yield on this investment? ANSWER 13.81%
Explanation:
[($23.90 × 500) − $10,500)] / $10,500 = .1381, or 13.81 percent
One year ago, you purchased 400 shares of Southern Cotton at $36.20 a share. During the
past year, you received a total of $250 in dividends. Today, you sold your shares for $38.50 a
share. What is your total return on this investment? ANSWER 8.08%
Explanation:
[$38.50 − $36.20 + ($)] / $36.20 = .808, or 8.08%
Todd purchased 600 shares of stock at a price of $68.20 a share and received a dividend of
$1.42 per share. After six months, he resold the stock for $71.30 a share. What was his total
dollar return? ANSWER $2,712
Explanation:
600 × ($71.30 − $68.20 + $1.42) = $2,712
Shane purchased a stock this morning at a cost of $13 a share. He expects to receive an
annual dividend of $.27 a share next year. What will the price of the stock have to be one
Answers
The total dollar return on a share of stock is defined as the: ANSWER capital gain or loss
plus any dividend income.
The capital gains yield is equal to: ANSWER (Pt + 1 − Pt)/Pt.
The rate of return earned on a U.S. Treasury bill is frequently used as a proxy for the:
ANSWER risk-free rate.
The standard deviation is a measure of: ANSWER volatility.
The average compound return earned per year over a multi-year period is called the:
ANSWER geometric average return.
Which one of the following statements is correct concerning the dividend yield and the total
return? ANSWER The total return can be negative but the dividend yield cannot be negative.
If you multiply the number of shares outstanding for a stock by the price per share, you are
computing the firm's: ANSWER market capitalization.
Which one of the following is considered the best method of comparing the returns on
various-sized investments? ANSWER percentage return
You purchased a stock for $30.43 a share, received a dividend of $.70 per share, and sold the
stock after one year for $30.22 a share. What was your dividend yield on this investment?
ANSWER 2.30%
, Explanation:
$.70 / $30.43 = .0230, or 2.30%
One year ago, you purchased 500 shares of stock at a cost of $10,500. The stock paid an
annual dividend of $1.10 per share. Today, you sold those shares for $23.90 each. What is the
capital gains yield on this investment? ANSWER 13.81%
Explanation:
[($23.90 × 500) − $10,500)] / $10,500 = .1381, or 13.81 percent
One year ago, you purchased 400 shares of Southern Cotton at $36.20 a share. During the
past year, you received a total of $250 in dividends. Today, you sold your shares for $38.50 a
share. What is your total return on this investment? ANSWER 8.08%
Explanation:
[$38.50 − $36.20 + ($)] / $36.20 = .808, or 8.08%
Todd purchased 600 shares of stock at a price of $68.20 a share and received a dividend of
$1.42 per share. After six months, he resold the stock for $71.30 a share. What was his total
dollar return? ANSWER $2,712
Explanation:
600 × ($71.30 − $68.20 + $1.42) = $2,712
Shane purchased a stock this morning at a cost of $13 a share. He expects to receive an
annual dividend of $.27 a share next year. What will the price of the stock have to be one
