finance data bank
Use the table for the question(s) below.
Consider the following Price and Dividend data for J. P. Morgan Chase:
Date 
Price ($) 
Dividend ($) 
December 31, 2008 
$40.06 

February 9, 2009 
$36.80 
$0.50 
May 7, 2009 
$30.41 
$0.50 
August 10, 2009 
$34.86 
$0.50 
November 8, 2009 
$25.86 
$0.50 
December 30, 2009 
$18.86 
22) Assume that you purchased J. P. Morgan Chase stock at the closing price on December 31, 2008 and sold it at the closing price on December 30, 2009. Calculate your realized annual return is for the year 2005.
Answer:
Use the table for the question(s) below.
Date 
Price ($) 
Dividend ($) 
Return 
(1 + return) 

December 31, 2008 
$40.06 
0.00% 
1 
1 

January 26, 2009 
$36.80 
$0.50 
6.89% 
0.931103 
0.931103 
April 28, 2009 
$30.41 
$0.50 
16.01% 
0.839946 
0.782076 
July 29, 2009 
$34.86 
$0.50 
16.28% 
1.162775 
0.909379 
October 28, 2009 
$25.86 
$0.50 
24.38% 
0.756168 
0.687643 
December 30, 2009 
$18.86 
27.07% 
0.729312 
0.501506 
The Product of (1 + returns)  1 = 0.49849
Consider the following realized annual returns:
Year End 
Market Realized Return 
Stock B Realized Return 
2000 
21.2% 
88.3% 
2001 
30.3% 
56.4% 
2002 
22.3% 
114.6% 
2003 
25.3% 
68.4% 
2004 
11.0% 
62.8% 
2005 
11.3% 
52.7% 
2006 
20.8% 
22.0% 
2007 
33.1% 
6.9% 
2008 
13.0% 
9.2% 
2009 
7.3% 
0.9% 
23) Suppose that you want to use the 10 year historical average return on the Market to forecast the expected future return on the Market. Calculate the 95% confidence interval for your estimate of the expect return.
24) Suppose that you want to use the 10 year historical average return on Stock B to forecast the expected future return on Stock B. Calculate the 95% confidence interval for your estimate of the expect return.
25) Using the data provided in the table, calculate the average annual return, the variance of the annual returns, and the standard deviation of the average returns for the market from 2000 to 2009.
26) Using the data provided in the table, calculate the average annual return, the variance of the annual returns, and the standard deviation of the average returns for Stock B from 2000 to 2009.
1) The excess return if the difference between the average return on a security and the average return for
A) Treasury Bonds.
B) a portfolio of securities with similar risk.
C) a broad based market portfolio like the S&P 500 index.
D) Treasury Bills.
2) Which of the following statements is false?
A) Expected return should rise proportionately with volatility.
B) Investors would not choose to hold a portfolio that is more volatile unless they expected to earn a higher return.
C) Smaller stocks have lower volatility than larger stocks.
D) The largest stocks are typically more volatile than a portfolio of large stocks.
3) Which of the following statements is false?
A) Investments with higher volatility have rewarded investors with higher average returns.
B) Investments with higher volatility should have a higher risk premium and therefore higher returns.
C) Volatility seems to be a reasonable measure of risk when evaluating returns on large portfolios and the returns of individual securities.
D) Riskier investments must offer investors higher average returns to compensate them for the extra risk they are taking on.
Use the table for the question(s) below.
Consider the following average annual returns:
Investment 
Average Return 
Small Stocks 
23.2% 
S&P 500 
13.2% 
Corporate Bonds 
7.5% 
Treasury Bonds 
6.2% 
Treasury Bills 
4.8% 
4) What is the excess return for the portfolio of small stocks?
A) 10.0%
B) 15.7%
C) 18.4%
D) 17.0%
5) What is the excess return for the S&P 500?
A) 5.7%
B) 7.0%
C) 0%
D) 8.4%
Answer: D
6) What is the excess return for corporate bonds?
A) 2.7%
B) 1.3%
C) 5.7%
D) 0%
7) What is the excess return for Treasury Bills?
A) 0%
B) 8.4%
C) 2.7%
D) 1.4%
8) Do expected returns for individual stocks increase proportionately with volatility?

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