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BADM 710 - Chapter 10 Questions with Explanations of Answers | latest upate 2024
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BADM 710 - Chapter 10 Questions with Explanations of Answers | latest upate 2024
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BADM 710 - Chapter 10Dollar Returns - ANS-- The sum of the cash received and the change in the value of the asset in
dollars
(Stock)Dollar Return = Dividend + Change in Market Value
(Bond)Dollar Return = Coupon + Change in Market Value
Percentage Returns - ANS-- The sum of the cash received and the change in the value of the
asset, divided by the initial investment
% Return = Dividend + Change in Market Value / Beggining Market Value + Dividend Yield +
Capital Gains Yield
Returns - ANS-- Really measure how well off we are or how bad we are after investing in some
type of asset
Holding Period Return (HPR) - ANS-- The holding period return is the return that an investor
would get when holding an investment over a period of T years
Large Company Stocks - ANS-- Portfolio of the S&P 500
Small Company Stocks - ANS-- Smallest 20% of companies listed on the NYSE
Long-term Corporate Bonds - ANS-- High quality corporate bonds with a maturity of 20 years
Long-term Government Bonds - ANS-- Government bonds with a maturity of 20 years
U.S Treasury Bills - ANS-- T-bills with 90 days to maturity
Risk-Free-Returns - ANS-- Returns on t-bills - There is nearly no risk
Risk Premium - ANS-- The risk premium is the added return over and above the risk free rate
resulting from bearing risk
Standard Deviation - ANS-- This is the measure of Risk
Arithmetic Average - ANS-- Return earned in an average period over multiple periods
- This option is overly optimistic for long horizons
- Arithmetic is always larger than Geometric unless R's are the same
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