1. The sample mean of stock market returns is 11%. The sample standard deviation of stock market returns is 30%. The risk-free rate is 2%.  What is the Sharpe ratio of the stock market portfolio? a) .3 b) .02 c) .2 d) .11

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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1. The sample mean of stock market returns is 11%. The sample standard deviation of stock market returns is 30%. The risk-free rate is 2%.  What is the Sharpe ratio of the stock market portfolio?

a) .3
b) .02
c) .2
d) .11
 
2.

Stock market returns are 22%, -7%, -20%, and 40% in the past four years. Which of the following statement is incorrect

a. The sample variance is 7.42%
b. The Sharpe ratio of the stock market portfolio is 0.32
c. The sample standard deviation is 27.24%
d. The sample mean return is 8.75%
 
6. 

You put up $50 at the beginning of the year for an investment. The value of the investment grows 6% and you earn a dividend of $2.50. Your HPR is

a. 8%
b. 6%
c. 9%
d. 11%
 
 
3.

Which of the following statement about inflation is incorrect

a. A positive inflation rate reduces purchase power of dollars
b. Excess money supply increases inflation
c. A positive inflation rate increases the real interest rate
d. A positive inflation rate lows the real interest rate
 
4.

If you desire to forecast performance of a mutual fund for next year, the best forecast will be given by the 

a. geometric average return
b. neither geometric average return nor arithmetic average return
c. arithmetic average return
d. both geometric average return and arithmetic average return

5.

You buy and hold a S&P 500 index fund. You always reinvest your dividends earned on the fund. Which method provides the best measure of the actual average historical performance of the investments you have chosen?

a. both geometric average return and arithmetic average return
b. neither geometric average return nor arithmetic average return
c. arithmetic average return
d. geometric average return
 
 
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