Fundamentals of Corporate Finance Canadian 3Rd Edition Berk Test Bank Full Chapter PDF

Fundamentals of Corporate Finance
Canadian 3rd Edition Berk Test Bank

Visit to download the full and correct content document: https://testbankdeal.com/dow
nload/fundamentals-of-corporate-finance-canadian-3rd-edition-berk-test-bank/
Fundamentals of Corporate Finance, 3d Cdn. Ed. (Berk et al.)
Chapter 10 Risk and Return in Capital Markets
10.1 A First Look at Risk and Return
1) On average, stocks have delivered higher returns than bonds in the long run.
Answer: TRUE
Diff: 1 Type: TF
Skill: Conceptual
Objective: 10.1 Identify which types of securities have historically had the highest returns and
which have been the most volatile
2) In Canada over the long term, small stocks on the S&P/TSX have provided the highest return
followed by long-term Government of Canada bonds.
Answer: TRUE
Diff: 1 Type: TF
Skill: Conceptual
3) Stocks with high returns are expected to have:

A) high variability.
B) low variability.
C) no relation to variability.
D) inverse relationship with variability.
E) no variability.
Answer: A
Diff: 1 Type: MC
Skill: Conceptual
4) Historically, stocks have delivered a ________ return on average compared to Treasury bills
but have experienced ________ fluctuations in values.
A) higher, higher
B) higher, lower
C) lower, higher
D) lower, lower
E) higher, similar
Answer: A
Diff: 1 Type: MC
Skill: Conceptual
1
© 2020 Pearson Canada Inc.
5) Investors demand a higher return for investments that have larger fluctuations in values
because:
A) they do not like risk.
B) they are risk seeking.
C) they invest for the long term.
D) they are more expensive.
E) they have higher transaction costs.
Answer: A
Diff: 1 Type: MC
Skill: Conceptual
6) Which of the following investments offered the lowest overall return over the past fifty years?
A) S&P/TSX Composite Index
B) Treasury bills
C) S&P 500
D) corporate bonds
E) long-term Government of Canada bonds
Answer: B
Diff: 1 Type: MC
Skill: Definition
7) Which of the following investments offered the highest overall return over the past fifty
years?
A) Treasury bills
B) S&P 500
C) S&P/TSX Composite Index
D) corporate bonds
Answer: C
Diff: 1 Type: MC
Skill: Definition
2
8) Which of the following investments had the largest fluctuations in overall return over the past
fifty years?
A) S&P/TSX Composite Index
B) S&P 500
C) corporate bonds
D) Treasury bills
Answer: A
Diff: 1 Type: MC
Skill: Definition
9) Why must riskier investments offer higher expected returns?

Answer: Because investors are risk averse, and would prefer to avoid fluctuations in the value of
their investments, risker investments must offer higher expected returns.
Diff: 1 Type: SA
Skill: Conceptual
10.2 Historical Risks and Returns of Stocks
1) Suppose you invested $60 in the Ishares Dividend Stock Fund (DVY) a month ago. It paid a
dividend of $0.70 today and then you sold it for $65. What was your return on the investment?
A) 8.25%
B) 9.00%
C) 9.50%
D) 9.75%
E) 10.00%
Answer: C
Explanation: $(65 + 0.7) - 60 = 5.7; 5.7 / 60 = 9.5%
Diff: 1 Type: MC
Skill: Analytical
Objective: 10.2 Compute the average return and volatility of returns from a set of historical asset
prices
3
2) Suppose you invested $55 in CIBC stock one month ago. Today, it paid a dividend of $0.35,
and then you sold it for $56.25. What was the return on your investment?
A) 2.9%
B) 2.3%
C) 2.2%
D) 2.8%
E) 1.6%
Answer: A
Explanation: 0.35/55 + (56.25 - 55)/55 = 2.9%
Diff: 1 Type: MC
Skill: Analytical
prices
3) Suppose you invested $7.55 in Big Rock Brewery one month ago. Today, it paid a dividend of
$0.10, and then you sold it for $7.35. What was the return on your investment?
A) 1%
B) -1%
C) -1.3%
D) 4.2%
E) 1.1%
Answer: C
Explanation: 0.10/7.55 + (7.35 - 7.55)/7.55 = -1.3%
Diff: 1 Type: MC
Skill: Analytical
prices
4) Greg purchased stock in Bear Stearns and Co. at a price of $89 per share. The company was
acquired by JP Morgan at a price of $10 per share. What is Greg's return on his investment?
A) -88.76%
B) -96.25%
C) -79.00%
D) -85.45%
E) -90.21%
Answer: A
Explanation: 10 - 89 = - 79; -79 / 89 = -88.76%
Diff: 2 Type: MC
Skill: Analytical
prices
4
5) You own shares in Yahoo that were purchased at a price of $21 per share. Microsoft has
offered to purchase Yahoo and buy your shares at a price of $31 per share. What will be your
return if you tender your shares to Microsoft and the deal is completed?
A) 47.62%
B) 33.45%
C) 49.65%
D) 43.34%
E) 37.71%
Answer: A
Explanation: 31 - 21 = 10; 10 / 21 = 47.62%
Diff: 1 Type: MC
Skill: Analytical
prices
6) Suppose you invested $98 in the Ishares High Yield Fund (HYG) a month ago. It paid a
dividend of $0.47 today and then you sold it for $99. What was your dividend yield and capital
gains yield on the investment?
A) 0.45%, 1.09%
B) 0.48%, 1.02%
C) 0.48%, 1.08%
D) 1.02%, 1.12%
E) 0.75%, 0.98%
Answer: B
Explanation: Div yld = 0.47 / 99 = 0.48%; cap gain = 99 - 98 = 1; 1 / 98 = 1.02%
Diff: 3 Type: MC
Skill: Analytical
prices
7) Suppose you invested $45 in TD Bank one month ago. It paid a dividend of $0.60, and you
sold it right after the dividend was paid for $44.90. What was your dividend yield and capital
gains yield on the investment?
A) 1.3%, -0.2%
B) -0.2%, 1.3%
C) 1.3%, 1.1%
D) 1.1%, -0.2%
E) 1.1%, 0.2%
Answer: A
Explanation: Div yld = 0.60 / 45 = 1.3%; cap gain = (44.9 - 45)/45 = -0.2%
Diff: 2 Type: MC
Skill: Analytical
prices
5
8) Suppose you invested $150 in Tesla Motors one month ago. It paid a dividend of $1.55, and
you sold it right after the dividend was paid for $162. What was your realized return from
holding the stock?
A) 6%
B) 1%
C) 9%
D) 8%
E) 7%
Answer: C
Explanation: Div yld = 1.55 / 150 = 1%; cap gain =(162 - 150)/150 = 8%
Realized return = 1% + 8% = 9%
Diff: 2 Type: MC
Skill: Analytical
prices
9) Suppose you invested $33 in Pfizer one month ago. It paid a dividend of $0.88 and you sold it
right after the dividend was paid for $31.14. What was your realized return from holding the
stock?
A) 2.7%
B) 8.7%
C) 8.3%
D) -2.9%
E) -5.6%
Answer: D
Explanation: Div yld = 0.88 / 33 = 2.7%; cap gain = (31.14 - 33)/33 = -5.6%
Realized return = 2.7 - 5.6 = -2.9%
Diff: 2 Type: MC
Skill: Analytical
prices
10) Your investment over one year yielded a capital gains yield of 5% and no dividend yield. If
the sale price was $119 per share, what was the cost of the investment?
A) $126.25
B) $111.67
C) $113.33
D) $117.25
E) $115.57
Answer: C
Explanation: 119 / 1.05 = 113.33
Diff: 1 Type: MC
Skill: Analytical
prices
6
11) Your investment over one year yielded a capital gains yield of 7% and a dividend yield of
4%. If the sale price was $86 per share, what was the cost of the investment?
A) $79.98
B) $86.00
C) $82.69
D) $77.47
E) $80.37
Answer: E
Explanation: Capital gain yield = 7%, 86/1.07 = 80.37
Diff: 1 Type: MC
Skill: Analytical
prices
12) Your investment over one year had a realized return of 9% and a dividend yield of 6%. If the
sale price was $45 per share, what was the cost of the investment?
A) $41.28
B) $43.69
C) $44.21
D) $45.00
E) $46.35
Answer: B
Explanation: Capital Gain Yield = 9 -6 = 3%; 45/1.03 = $43.69
Diff: 2 Type: MC
Skill: Analytical
prices
13) Your investment over one year had a realized return of 7% and a dividend of $1.25. If the
sale price was $36 per share, what was the cost of the investment?
A) $32.15
B) $32.78
C) $33.64
D) $34.81
E) $34.90
Answer: D
Explanation: (36 + 1.25)/1.07 = $34.81
Diff: 2 Type: MC
Skill: Analytical
prices
7
14) Amazon.com stock prices gave a realized return of 5%, -5%, 10%, and -10% over four
successive quarters. What is the annual realized return for Amazon.com for the year?
A) -1.25%
B) 2.50%
C) 0.00%
D) 1.25%
E) 1.00%
Answer: A
Explanation: 1.05 × 0.95 × 1.10 × 0.9 = 0.9875; 0.9875 - 1 = -1.25%
Diff: 3 Type: MC
Skill: Analytical
prices
15) Tesla Motors stock had a realized return of 18%, 4%, -12%, and -6% over four successive
quarters. What is your annual realized return if you bought Tesla at the beginning of the year and
sold it at the end of the year?
A) 1.5%
B) 1%
C) 4%
D) 2.5%
E) 0%
Answer: A
Explanation: 1.18 × 1.04 × 0.88 × 0.94 - 1 = 1.5%
Diff: 2 Type: MC
Skill: Analytical
prices
16) Lululemon Athletica stock had a realized return of 7%, -2%, -3%, and -8% over four
successive quarters. What is your annual realized return if you bought Lululemon at the
beginning of the year and sold it at the end of the year?
A) -1.5%
B) 21.4%
C) -6%
D) -6.4%
E) 0%
Answer: D
Explanation: 1.07 × .98 × .97 × .92 - 1 = -6.4%
Diff: 2 Type: MC
Skill: Analytical
prices
8
17) IGM Realty had a price of $30, $30, $35, $33, and $25 at the end of the last five quarters. If
IGM pays a dividend of $2 at the end of each quarter, what is the annual realized return on IGM?
A) 8.61%
B) 7.6%
C) 7.10%
D) 8.09%
E) 8.24%
Answer: B
Explanation:
Cumulative
Date Price Dividend Return Return
1 $30 $2
2 $30 $2 6.667%
3 $35 $2 23.333% 1.3154%
4 $33 $2 0% 1.3154%
5 $25 $2 -18.1819% 1.076%
Ann. Ret = 7.6%
Diff: 3 Type: MC
Skill: Analytical
prices
18) You purchased Enron stock at a price of $30 per share. Its price was $20 after six months and
the company declared bankruptcy at the end of the next six months. The realized return over the
last year is:
A) -99%
B) -75%
C) -150%
D) -100%
E) -125%
Answer: D
Explanation: 0 - 30 / 30 = -100%
Diff: 1 Type: MC
Skill: Analytical
prices
9
19) The S&P TSX Composite index delivered a return of 14.48%, 24.13%, 17.26% and 9.83%
over four successive years. What is the arithmetic average annual return per year?
A) 16.43%
B) 20.8%
C) 14.48%
D) 18.54%
E) 15.96%
Answer: A
Explanation: (14.48 + 24.13 + 17.26 + 9.83)/4 = 16.43%
Diff: 1 Type: MC
Skill: Analytical
prices
20) The S&P TSX Composite index delivered annual returns of 10.55%, -8.32%, 21.08% and
9.10% from 2014 to 2017. What was the average compound annual return per year?
A) 7.5%
B) 6.3%
C) 7.6%
D) 7.0%
E) 6.6%
Answer: C
Explanation: $1 grows to 1 × 1.1055 × 0.9168 × 1.2108 × 1.091 = $1.34 over 4 years.
1.34(1/4) - 1 = 7.6%
Diff: 2 Type: MC
Skill: Analytical
prices
9.10% from 2014 to 2017. If you invested $10,000 in the index at the beginning of 2010, what
amount would your investment have been worth at the end of 2013?
A) $13,256
B) $13,388
C) $12,908
D) $12.974
E) $14.388
Answer: B
Explanation: $10000 grows to 10000 × 1.1055× 0.9168 × 1.2108 × 1.091 = $13,888
Diff: 2 Type: MC
Skill: Analytical
prices
10
9.10% from 2014 to 2017. What is the standard deviation of the index returns over these four
years?
A) 131.67%
B) 8.14%
C) 7.27%
D) 9.94%
E) 12.18%
Answer: E
Explanation: Average return = (10.55 - 8.32 + 21.08 + 9.10) / 4 = 8.10;
Variance = ((10.55 - 8.10)2 + (-8.32 - 8.10)2 + (21.08 -8.10)2 + (9.10 - 8.10)2))/(4 - 1) = 148.36
Standard deviation = 148.360.5 = 12.18%
Diff: 3 Type: MC
Skill: Analytical
prices
9.10% from 2014 to 2017. What is a 95% confidence interval for the 2014 return?
A) 4.20% to 11.47%
B) 7.27% to 11.47%
C) -4.08% to 20.28%
D) -2.67% to 17.21%
E) 6.91% to 7.63%
Answer: C
Explanation: Average return = (10.55 - 8.32 + 21.08 + 9.10) / 4 = 8.10;
Variance = ((10.55 - 8.10)2 + (-8.32 - 8.10)2 + (21.08 -8.10)2 + (9.10 - 8.10)2))/(4 - 1) = 148.36
Average +/- 2 × standard deviation = 8.10 - 12.18 to 8.10 + 12.18 = -4.08% to 20.28%
Diff: 3 Type: MC
Skill: Analytical
prices
11
24) You purchase a 30-year, zero-coupon bond for a price of $20. The bond will pay back $100
after 30 years and make no interim payments. The annual compounded return (geometric average
return) on this investment is:
A) 5.31%
B) 6.54%
C) 4.78%
D) 5.51%
E) 4.96%
Answer: D
Explanation: Using a financial calculator: N = 30, PV = -20, FV = 100; CPT = I/Y; I/Y = 5.51%
Diff: 1 Type: MC
Skill: Analytical
prices
25) Suppose that a stock gave a realized return of 20% over a two-year time period and a 10%
return over the third year. The geometric average annual return is:
A) 9.70%
B) 11.20%
C) 14.96%
D) 15.00%
E) 16.55%
Answer: E
Explanation: 1.2 × 1.2 × 1.1 = 1.584; geometric average = (1.584)0.333 = 1.1655; hence =
16.55%
Diff: 1 Type: MC
Skill: Analytical
prices
26) Suppose the quarterly arithmetic average return for a stock is 5% per quarter and the stock
gives a return of 10% each over the next two quarters. The arithmetic average return over the six
quarters is:
A) 9%
B) 6.67%
C) 7.5%
D) 10%
E) 12%
Answer: B
Explanation: (5 + 5 + 5 + 5 + 10 + 10) / 6 = 6.67%
Diff: 1 Type: MC
Skill: Analytical
prices
12
27) The geometric average annual return for a large capitalization stock portfolio is 12% for ten
years and 5% per year for the next five years. The geometric average annual return for the entire
15-year period is:
A) 9.95%
B) 9.62%
C) 9.11%
D) 10.23%
E) 10.97%
Answer: B
Explanation: Compound return for first ten years = (1.12)10 = 3.1058;
compound return for next 5 years = (1.05)5 = 1.27628;
total return over 15 years = 3.1058 × 1.27628 = 3.9639;
geometric average annual return = (3.9639)(1/15) = 1.0962; hence answer = 9.62%
Diff: 3 Type: MC
Skill: Analytical
prices
28) Ford Motor Company had realized returns of 10%, 20%, 20%, and 10% over four quarters.
What is the quarterly standard deviation of returns for Ford calculated from this sample?
A) 5.77%
B) 5.11%
C) 5.99%
D) 5.00%
E) 6.12%
Answer: A
Explanation: Average return = (10 + 20 + 20 +10) / 4 = 15;
Variance = ((10 - 15)2 + (20 - 15)2 + (20 - 15)2 + (10 - 15)2))/(4 - 1) = 33.33
Diff: 3 Type: MC
Skill: Analytical
prices
13
29) Ivanhoe Energy Inc had realized returns of 5.5%, -3.6%, 8%, and 7.5% over four quarters.
What is the quarterly standard deviation of returns for Ivanhoe?
A) 21.95%
B) 29.26%
C) 5.41%
D) 4.68%
E) 4.35%
Answer: C
Explanation: Average return = (5.5 - 3.6 + 8 + 7.5) / 4 = 4.35;
Variance = ((5.5 - 4.35)2 + (-3.6 - 4.35)2 + (8 - 4.35)2 + (7.5 -4.35)2))/(4 - 1) = 29.26
Standard deviation =29.260.5 = 5.41%
Diff: 3 Type: MC
Skill: Analytical
prices
30) Bombardier Inc had realized returns of -3%, -2%, -5%, and -7% over four quarters. What is
the quarterly standard deviation of returns for Bombardier?
A) 1.9%
B) 3.7%
C) 4.9%
D) 2.2%
E) 3.4%
Answer: D
Explanation: Average return = (-3 -2 -5 -7) / 4 = -4.25;
Variance = ((-3 + 4.25)2 + (-2 + 4.25)2 + (-5 + 4.25)2 + (-7 + 4.25)2))/(4 - 1) = 4.92
Diff: 3 Type: MC
Skill: Analytical
prices
14
31) The standard deviation of returns of:
I. small capitalization stocks is higher than that of large capitalization stocks.
II. large capitalization stocks is lower than that of corporate bonds.
III. corporate bonds is higher than that of Treasury bills.
Which statement is TRUE?
A) I and III
B) I, II, and III
C) I and II
D) I only
E) II only
Answer: A
Diff: 1 Type: MC
Skill: Conceptual
prices
32) Treasury bill returns are 5%, 4%, 3%, and 6% over four years. The standard deviation of
returns of Treasury bills is:
A) 1.51%
B) 1.11%
C) 1.00%
D) 1.29%
E) 1.43%
Answer: D
Explanation: Average return = (5 + 4 + 3 + 6) / 4 = 4.5;
standard deviation = ((5 - 4.5)2 + (4 - 4.5)2 + (3 - 4.5)2 + (6 - 4.5)2)) / (4 - 1) = 1.29%
Diff: 3 Type: MC
Skill: Analytical
prices
33) If asset A's return is exactly two times asset B's return, then following risk return tradeoff,
the standard deviation of asset A should be ________ times the standard deviation of asset B.
A) 3
B) 2
C) 1
D) 4
E) 5
Answer: B
Diff: 1 Type: MC
Skill: Conceptual
prices
15
34) If the returns on a stock index can be characterized by a normal distribution with mean 12%,
the probability that returns will be lower than 12% over the next period equals:
A) 50%
B) 25%
C) 46%
D) 33%
E) 70%
Answer: A
Diff: 2 Type: MC
Skill: Conceptual
prices
35) The probability mass between two standard deviations around the mean for a normal
distribution is:
A) 66%
B) 90%
C) 75%
D) 95%
E) 50%
Answer: D
Diff: 2 Type: MC
Skill: Conceptual
prices
36) The Ishares Bond Index fund (TLT) has a mean and annual standard deviation of returns of
7% and 10%, respectively. What is the 66% confidence interval for the returns on TLT?
A) -5%,10%
B) 7%,10%
C) -3%, 17%
D) -10%,10%
E) -5%, 15%
Answer: C
Explanation: 66% confidence interval = mean - standard deviation, mean + standard deviation;
7 - 10 = -3%; 7 + 10 = 17%
Diff: 2 Type: MC
Skill: Analytical
prices
16
37) The average annual return over the period 1886-2006 for stocks that comprise the S&P 500
is 10%, and the standard deviation of returns is 20%. Based on these numbers, what is a 95%
confidence interval for 2007 returns?
A) -15%,25%
B) -20%,40%
C) -30%, 50%
D) -30%,40%
E) -10%, 30%
Answer: C
Explanation: 10 - 2 × 20 = -30%; 10 + 2 × 20 = 50%
Diff: 2 Type: MC
Skill: Analytical
prices
is 12%, and the standard deviation of returns is 20%. Based on these numbers, what is a 95%
A) -28%, 52%
B) -10%,40%
C) -20%,35%
D) -15%, 35%
E) -5%, 25%
Answer: A
Explanation: 12 - 2 × 20 = -28%; 12 + 2 × 20 = 52%
Diff: 2 Type: MC
Skill: Analytical
prices
is 10.5%, and the standard deviation of returns is 18.5%. Based on these numbers, what is a 95%
A) -18.5%, 18.5%
B) -10%, 10%
C) -26.5%, 47.5%
D) -37%, 37%
E) -8%, 29%
Answer: C
Explanation: 10.5 - 2 × 18.5 = -26.5%; 10.5 + 2 × 18.5 = 47.5%
Diff: 2 Type: MC
Skill: Conceptual
prices
17
40) If a stock pays dividends at the end of each quarter, with realized returns of R1, R2, R3, and
R4 each quarter, then the annual realized return is calculated as:
A) Rannual = (1 + R1)(1 + R2)(1 + R3)(1 + R4) - 1
B) Rannual = R1 + R2 + R3 + R4
C) Rannual = (1 + R1)(1 + R2)(1 + R3)(1 + R4)
D) Rannual =
E) Rannual = (1 + R1)(1 + R2)(1 + R3)(1 + R4) + 1

Answer: A
Diff: 2 Type: MC
Skill: Analytical
prices
Use the table for the question(s) below.
Consider the following price and dividend data for Ford Motor Company:
Date Price ($) Dividend ($)

December 31, 2004 $14.64
January 26, 2005 $13.35 $0.10
April 28, 2005 $9.14 $0.10
July 29, 2005 $10.74 $0.10
October 28, 2005 $8.02 $0.10
December 30, 2005 $7.72
41) Assume that you purchased Ford Motor Company stock at the closing price on December 31,
2004 and sold it after the dividend had been paid at the closing price on January 26, 2005. Your
dividend yield for this period is closest to:
A) -8.15%
B) -8.80%
C) 0.70%
D) 0.75%
E) 1.25%
Answer: C
Explanation: div / P0 = 0.10 / 14.64 = 0.0068
Diff: 2 Type: MC
Skill: Analytical
prices
18
capital gains rate (yield) for this period is closest to:
A) 0.70%
B) 0.75%
C) -8.80%
D) -8.15%
E) 1.25%
Answer: C
Explanation: (P1 - P0) / P0 = (13.35 - 14.64) / 14.64 = -0.088115
Diff: 2 Type: MC
Skill: Analytical
prices
total return rate (yield) for this period is closest to:
A) 0.70%
B) -8.13%
C) -8.80%
D) 0.75%
E) 1.25%
Answer: B
Explanation: (P1 + D1 - P0) / P0 = (13.35 + 0.10 - 14.64) / 14.64 = -0.08128
Diff: 2 Type: MC
Skill: Analytical
prices
19
2014 and sold it at the closing price on December 30, 2015. Your realized annual return is for the
year 2015 is closest to:
A) -44.5%
B) -45.1%
C) -47.3%
D) -48.5%
E) -46.3%
Answer: B
Explanation:
Price (1 +
Date ($) Dividend ($) Return return)
December 31,
2014 $14.64 1 1
January 26, 2015 $13.35 $0.10 -8.13% 0.918716 0.918716
April 28, 2015 $9.14 $0.10 -30.79% 0.692135 0.635875
July 29, 2015 $10.74 $0.10 18.60% 1.185996 0.754145
October 28, 2015 $8.02 $0.10 -24.39% 0.756052 0.570173
December 30,
2015 $7.72 -3.74% 0.962594 0.548845
The Product of
(1 + returns) - 1 = -0.45116
The last column in the table contains the cumulative product of (1 + returns)
Diff: 3 Type: MC
Skill: Analytical
prices
20
Consider the following realized annual returns:
S&P 500 IBM

Realized Realized
Year-end Return Return
1996 23.6% 46.3%
1997 24.7% 26.7%
1998 30.5% 86.9%
1999 9.0% 23.1%
2000 -2.0% 0.2%
2001 -17.3% -3.2%
2002 -24.3% -27.0%
2003 32.2% 27.9%
2004 4.4% -5.1%
2005 7.4% -11.3%
45) The average annual return on the S&P 500 from 1996 to 2005 is closest to:
A) 8.75%
B) 4.00%
C) 7.10%
D) 9.75%
E) 5.85%
Answer: A
Explanation: Rannual = = = = 8.82%
Diff: 1 Type: MC
Skill: Analytical
prices
46) The average annual return on IBM from 1996 to 2005 is closest to:
A) 18.2%
B) 16.40%
C) 18.7%
D) 29.9%
E) 20.24%
Answer: B
Explanation: Rannual = = = = 16.45%
Diff: 1 Type: MC
Skill: Analytical
prices
21
47) The average annual return over the period 1926-2009 for the S&P 500 is 11.7%, and the
standard deviation of returns is 20.5%. Based on these numbers, what is a 95% confidence
interval for 2010 returns?
A) 1.5%,, 22.0%
B) -8.8%, 32.2%
C) -29.3%, 52.7%
D) -29.3%, 73.2%
E) -14.4%, 26.2%
Answer: C
Explanation: 11.7% - (2 × 20.5%) = -29.3%; 11.7% +(2 × 20.5%) = 52.7%
Diff: 2 Type: MC
Skill: Analytical
prices
48) The average annual return over the period 1926-2009 for the S&P 500 is 11.7%, and the
A) 1.5%,, 22.0%
B) -8.8%, 32.2%
C) -29.3%, 52.7%
D) -29.3%, 73.2%
E) -12.6%, 29.8%
Answer: B
Explanation: 11.7% - (1 × 20.5%) = -8.8%; 11.7% +(1 × 20.5%) = 32.2%
Diff: 3 Type: MC
Skill: Analytical
prices
49) The average annual return over the period 1926-2009 for small stocks is 22.1%, and the
A) 11.1%, 33.2%
B) 0%, 44.2%
C) -22.1%, 44.2%
D) -22.1%, 66.3%
E) -12.5%, 45.7%
Answer: D
Explanation: 22.1% - (2 × 22.1%) = -22.1%; 22.1% +(2 × 22.1%) = 66.3%
Diff: 2 Type: MC
Skill: Analytical
prices
22
50) What are the two components of realized return from a stock investment?
Answer: The total realized return earned from a stock investment comprises two components:
dividend yield and capital gains yield.
Diff: 1 Type: SA
Skill: Conceptual
prices
51) Which type of investment has historically had the highest volatility?
Answer: Investments in small stocks have historically witnessed the highest volatility.
Diff: 1 Type: SA
Skill: Conceptual
prices
52) Which type of investment has historically had the lowest volatility?
Answer: Investments in Treasury bills have historically witnessed the lowest volatility.
Diff: 1 Type: SA
Skill: Conceptual
prices
10.3 The Historical Tradeoff between Risk and Return
1) Rational investors may be willing to choose an investment that has additional risk but does not
offer additional reward.
Answer: FALSE
Diff: 1 Type: TF
Skill: Conceptual
Objective: 10.3 Understand the trade-off between risk and return for large portfolios versus
individual stocks
2) Historical evidence on the returns of large portfolios of stock and bonds shows that
investments with higher volatility have rewarded investors with higher returns.
Answer: TRUE
Diff: 1 Type: TF
Skill: Conceptual
individual stocks
3) There is a clear link between the volatility of returns for individual stocks and and the returns
for individual stocks.
Answer: FALSE
Diff: 1 Type: TF
Skill: Conceptual
individual stocks
23
4) For large portfolios, investors should expect a higher return for higher volatility, but this does
not hold true for individual stocks.
Answer: TRUE
Diff: 2 Type: TF
Skill: Conceptual
individual stocks
5) While ________ seems to be a reasonable measure of risk when evaluating a large portfolio,
the ________ of an individual security does not explain the size of its average return.
A) volatility, volatility
B) the mean return, standard deviation
C) mode, volatility
D) volatility, compound annual return
E) volatility, mean return
Answer: A
Diff: 1 Type: MC
Skill: Conceptual
individual stocks
6) There is an overall relationship between ________ and ________—larger stocks have a lower
volatility overall.
A) size, risk
B) mean, standard deviation
C) risk aversion, size
D) volatility, mean
E) return, size
Answer: A
Diff: 1 Type: MC
Skill: Conceptual
individual stocks
7) Which of the following statements is TRUE?

A) On average, smaller stocks have lower volatility than Treasury bills.
B) Portfolios of smaller stocks are typically less volatile than individual small stocks.
C) On average, smaller stocks have lower returns than larger stocks.
D) On average, Treasury bills have higher returns than world stocks.
E) Portfolios of large stocks are typically more volatile than individual small stocks.
Answer: B
Diff: 1 Type: MC
Skill: Conceptual
individual stocks
24
8) Is volatility a reasonable measure of risk when evaluating large portfolios?
Answer: Yes, volatility is a reasonable measure of risk for large portfolios, once they are fully
diversified.
Diff: 1 Type: SA
Skill: Conceptual
individual stocks
9) When looking at investment portfolios historically, was there a pattern between returns and
volatility?
Answer: Yes, there is a direct relationship between return and volatility—i.e., high volatility
investments have generally yielded higher returns.
Diff: 1 Type: SA
Skill: Conceptual
individual stocks
10) Is volatility a reasonable measure of risk when evaluating the investment in a single stock?
Answer: No. In the case of an investment in a single stock, the volatility does not explain the
size of its average return, because the stock has its own unique risk that can still be diversified
away.
Diff: 1 Type: SA
Skill: Conceptual
individual stocks
10.4 Common Versus Independent Risk
1) The risk that inflation rates are likely to increase in the next year is an example of common
risk.
Answer: TRUE
Diff: 1 Type: TF
Skill: Conceptual
Objective: 10.4 Describe the difference between common and independent risk
2) A portfolio of stocks where each stock has a large component of independent risk benefits
when such stocks are held in a portfolio, because the independent risks are averaged out. This is
also referred to as diversification of risks.
Answer: TRUE
Diff: 1 Type: TF
Skill: Conceptual
25
3) Risk that is linked across outcomes is called:
A) diversifiable risk.
B) common risk.
C) uncorrelated risk.
D) independent risk.
E) systematic risk.
Answer: B
Diff: 1 Type: MC
Skill: Definition
Use the information for the question(s) below.
Big Cure and Little Cure are both pharmaceutical companies. Big Cure presently has a potential
"blockbuster" drug before the Food and Drug Administration (FDA) waiting for approval. If
approved, Big Cure's blockbuster drug will produce $1 billion in net income for Big Cure. Little
Cure has ten separate, less important drugs before the FDA waiting for approval. If approved,
each of Little Cure's drugs would produce $100 million in net income for Little Cure. The
probability of the FDA approving a drug is 50%.
4) What is the expected payoff for Big Cure's Blockbuster drug?

A) $100 million
B) $0
C) $1 billion
D) $500 million
E) $50 million
Answer: D
Explanation: expected payoff = prob of payoff × amount if successful
= 0.5 × $1 billion = $500 million
Diff: 1 Type: MC
Skill: Analytical
5) What is the expected payoff for Little Cure's ten drugs?

A) $500 million
B) $100 million
C) $1 billion
D) $0
E) $50 million
Answer: A
Explanation: expected payoff = prob of payoff × amount if successful
= 0.5 × $100 = $50 million for each drug
$50 million × 10 drugs = $500 million
Diff: 1 Type: MC
Skill: Analytical
26
10.5 Diversification in Stock Portfolios
1) Independent risks can be diversified by holding a large number of uncorrelated assets with
independent risks.
Answer: TRUE
Diff: 1 Type: TF
Skill: Conceptual
Objective: 10.5 Explain how diversified portfolios remove independent risk, leaving common
risk as the only risk requiring a risk premium
2) A stock whose return does not depend on overall economic conditions has a low systematic
risk.
Answer: FALSE
Diff: 1 Type: TF
Skill: Conceptual
3) Investors should earn a risk premium for bearing unsystematic risk.

Answer: FALSE
Diff: 1 Type: TF
Skill: Conceptual
4) Stocks have both diversifiable risk and undiversifiable risk, but only diversifiable risk is
rewarded with higher expected returns.
Answer: FALSE
Diff: 1 Type: TF
Skill: Conceptual
5) In general, it is possible to eliminate ________ risk by holding a large portfolio of assets.

A) unsystematic
B) systematic
C) unsystematic and systematic
D) unwanted
E) market
Answer: A
Diff: 1 Type: MC
Skill: Conceptual
27
6) Apple computer's stock price jumped when it announced that its revenue had increased
because of the successful launch of iPhone and the increased sales of Macintosh computers. This
is an example of
A) market risk.
B) unsystematic risk.
C) systematic risk.
D) common risk.
E) unwanted risk.
Answer: B
Diff: 1 Type: MC
Skill: Conceptual
7) The risk premium of a security is determined by its ________ risk and does not depend on its
________ risk.
A) systematic, undiversifiable
B) systematic, unsystematic
C) diversifiable, diversifiable
D) diversifiable, unsystematic
E) unsystematic, diversifiable
Answer: B
Diff: 1 Type: MC
Skill: Conceptual
8) The risk premium is the difference between the average return on a security and the average
return for:
A) long-term Government of Canada bonds.
B) a portfolio of securities with similar risk.
C) a broad-based market portfolio like the S&P 500 index.
D) Treasury bills.
E) corporate bonds.
Answer: D
Diff: 1 Type: MC
Skill: Definition
28
Consider the following average annual returns:
Average
Investment Return
Small Stocks 23.2%
S&P 500 13.2%
Corporate Bonds 7.5%
Treasury Bonds 6.2%
Treasury Bills 4.8%
9) What is the risk premium for the portfolio of small stocks?

A) 10.0%
B) 15.7%
C) 18.4%
D) 17.0%
E) 17.5%
Answer: C
Explanation:
Average Average Return -
Investment Return Treasury Bill Return
Small Stocks 23.2% 18.40%
S&P 500 13.2% 8.40%
Corporate Bonds 7.5% 2.70%
Treasury Bonds 6.2% 1.40%
Treasury Bills 4.8% 0.0%
Diff: 1 Type: MC
Skill: Analytical
29
10) What is the risk premium for the S&P 500?
A) 5.7%
B) 7.0%
C) 0%
D) 8.4%
E) 4.5%
Answer: D
Explanation:
Investment Return Treasury Bill Return
S&P 500 13.2% 8.40%
Treasury Bills 4.8%
Diff: 1 Type: MC
Skill: Analytical
11) What is the risk premium for corporate bonds?

A) 2.7%
B) 1.3%
C) -5.7%
D) 0%
E) 8.4%
Answer: A
Explanation:
Investment Return Treasury bill Return
S&P 500 13.2% 8.40%
Treasury Bills 4.8%
Diff: 1 Type: MC
Skill: Analytical
30
12) What is the risk premium for Treasury bills?
A) 0%
B) -8.4%
C) -2.7%
D) -1.4%
E) -18.4%
Answer: A
Explanation:
Investment Return Treasury bill Return
S&P 500 13.2% 8.40%
Treasury Bills 4.8% 0.00%
Diff: 1 Type: MC
Skill: Analytical
13) When investing for a long horizon, investors care about the volatility of ________ returns
and not the volatility of ________ returns.
A) average, cumulative
B) cumulative, average
C) mean, cumulative
D) mean, average
E) average, mean
Answer: B
Diff: 1 Type: MC
Skill: Conceptual
14) Many former employees at Enron, an energy trading and supply company, had a large part of
their portfolio invested in Enron stock. These employees were bearing a high degree of
________ risk.
A) unsystematic
B) systematic
C) market specific
D) non-diversifiable
E) common
Answer: A
Diff: 1 Type: MC
Skill: Conceptual
31
15) Which of the following is a systematic risk?
A) the risk that oil prices rise, increasing production costs
B) the risk that the CEO is killed in a plane crash
C) the risk of a key employee being hired away by a competitor
D) the risk of a product liability lawsuit
E) the risk of an equipment failure
Answer: A
Diff: 1 Type: MC
Skill: Conceptual
16) Which of the following is a diversifiable risk?

A) the risk that oil prices rise, increasing production costs
B) the risk that the economy slows, reducing demand for your firm's products
C) the risk that your new product will not receive regulatory approval
D) the risk that the Bank of Canada raises interest rates
E) the risk that a new government is elected and raises corporate taxes
Answer: C
Diff: 1 Type: MC
Skill: Conceptual
Use the information for the question(s) below.
Consider an economy with two types of firms, S and I. S firms always move together, but I firms
move independently of each other. For both types of firms there is a 70% probability that the
firm will have a 20% return and a 30% probability that the firm will have a -30% return.
17) What is the expected return for an individual firm?

A) 3%
B) 5%
C) 14%
D) -5%
E) 0%
Answer: B
Explanation: expected return = 0.7(20%) + 0.3(-30%) = 5%
Diff: 1 Type: MC
Skill: Analytical
32
18) The standard deviation for the return on an individual firm is closest to:
A) 23.0%
B) 5.25%
C) 15.0%
D) 10.0%
E) 25.0%
Answer: A
standard deviation = = 0.2291
Diff: 2 Type: MC
Skill: Analytical
19) The standard deviation for the return on an portfolio of 20 type S firms is closest to:
A) 15.0%
B) 23.0%
C) 5.25%
D) 5.10%
E) 20.0%
Answer: B
Since all these firms move the same, there is no adjustment to the standard deviation.
Diff: 2 Type: MC
Skill: Analytical
20) The standard deviation for the return on an portfolio of 20 type I firms is closest to:
A) 5.25%
B) 15.0%
C) 5.10%
D) 23.0%
E) 20.0%
Answer: C
Since all these firms move independently,
stdev = stdev(single firm) / = 0.2291 / = 0.0512
Diff: 2 Type: MC
Skill: Analytical
33
21) If the Bank of Canada were to change from an expansionary to contractionary monetary
policy, this would be an example of:
A) unsystematic risk.
B) systematic risk.
C) independent risk.
D) diversification risk.
E) unwanted risk.
Answer: B
Diff: 2 Type: MC
Skill: Analytical
22) Independent risk is more closely related to:

A) unsystematic risk.
B) systematic risk.
C) common risk.
D) diversification risk.
E) unwanted risk.
Answer: A
Diff: 2 Type: MC
Skill: Analytical
23) What is the difference between systematic and unsystematic risk?

Answer: Systematic risk refers to fluctuations of a stock's return that are due to market-wide
news which affects all stocks simultaneously. Unsystematic risk refers to fluctuations of a stock's
return that are due to company or industry-specific news, which are unrelated across stocks.
Diff: 1 Type: SA
Skill: Conceptual
24) How does diversification affect systematic and unsystematic risk?

Answer: Diversification does not affect systematic risk, since all stocks are affected by this type
of risk, and increasing the number of stocks in a portfolio will not eliminate systematic risk.
Volatility declines as the number of firms in a portfolio increases, until eventually diversification
will eliminate unsystematic risk.
Diff: 1 Type: SA
Skill: Conceptual
34
25) Explain why investors do not receive a risk premium for exposure to unsystematic risk.
Answer: Since investors can eliminate unsystematic risk through diversification, any stock that
paid an additional risk premium for unsystematic risk would be bought until the share price rose
sufficiently to eliminate the risk premium.
Diff: 1 Type: SA
Skill: Conceptual
35
Another random document with
no related content on Scribd:
The Spittle Houses.
Among the properties which fell to the portion of Katherine
Legh, after the dissolution of the Hospital were “all those messuages,
houses and buyldinges, landes and tenements callyd the Spyttell
howses, with all the orchards and gardens thereunto adjoyning.” The
only property situated within the Precinct that can be traced as
belonging to Katherine, consists of (i.) four houses and gardens,
immediately to the east of the churchyard[613] and, between these and
what is now Shaftesbury Avenue, (ii.) a house, garden and orchard.
[614]
The westernmost house of (i.) was probably The Angel, which is
definitely mentioned as having been transferred to Katherine, but
the remaining houses, etc., almost certainly were the Spittle houses,
with their orchards and gardens. They are shown distinctly on Agas’s
Map (Plate 1).
Pasture Ground.
The whole of the remainder of the Precinct to the south of the
Hospital was, in the days of Elizabeth, pasture ground, and is
probably to be identified with the close lying within the Precinct,
commonly called the Pale Close, which is stated[615] to have formed
part of the property transferred to Lord Lisle. The first specific
mention of the ground occurs in 1564, when the jurors holding the
Inquisitionem Post Mortem on Francis Downes found[616] that he was
seized, inter alia, of and in four messuages and four acres of pasture
in the parish of St. Giles-in-the-Fields. Downes, it is stated,
purchased the property from Thomas Carew, son and heir of Sir
Wymonde Carew, to whom it had been sold by Lord Lisle.
The four acres subsequently passed to John Graunge, in 1566,
whose son sold them in 1611 to Robert Lloyd (otherwise called Floyd
or Flood). On the latter’s death in 1617, he was found to be seized of
and in a house with a garden on the east side, a barn and garden on
the south of the house, and a stable and two closes of pasture,
containing four acres, adjoining the barn and garden.[617] The next
reference to the ground is in 1622, when it is referred to[618] as “two
closes, formerly pasture, late converted into gardens and
purchased ... by Abraham Speckard and Dorothy his wife.” It next
passed to Sir Richard Stydolph, for Charles Tryon, his grandson,
refers in his will,[619] signed 2nd November, 1705, to “a piece or
parcell of ground containing about four acres lying in the parish of
St. Giles-in-the-Fields ... near the church ... on which said ground are
now standing ... severall houses and other buildings held by severall
leases thereof granted by Sir Richard Stydolphe ... all or most
whereof will in few years expire.” With this fact is undoubtedly to be
connected the licence granted in July, 1671, to Sir Richard Stydolph
to continue building at the back of St. Giles’s church. The licence[620]
sets forth that Stydolph had let ground “on the backside of St. Giles’
Church in the way to Pickadilly to severall poore men who build
hansome and uniforme houses, some whereof were quite covered
and the fundacions of the rest laid,” before the proclamation
prohibiting building on new foundations had been issued. In due
course, “Christopher Wren, Esq.,” viewed the place and made a
report, approving generally of the scheme and suggesting that it
might “tend in some measure to cure the noisomnesse of that part,”
provided that the building was carried out in accordance with a
settled design. On this condition the necessary permission was given,
and it was provided that two copies of the “designe, mapp or charte”
should be made, neither of which, unfortunately, is available at the
present day. Stidwell Street preserved for some time, in garbled
form, the name of the owner of these lands.
The Manor and Possessions of St. Giles’
Hospital.
Up to within a few years of its dissolution, the Hospital of St. Giles, or
rather that of Burton Lazars, in whose custody it was, owned the greater
portion of the present Parish of St. Giles, together with large estates in other
parishes.
On 2nd June, 1536, however, Henry VIII. effected an exchange[621]
with the Master of Burton Lazars, whereby the latter received certain
property in Leicestershire and transferred to the King the undermentioned:
—
Manors of Feltham and Heston.
Messuages, etc., in Feltham and Heston.
2 acres of meadow in the Fields of St. Martins.
25 acres of pasture lying in the village of St. Giles.[622]
5 acres of pasture near Colman’s Hedge.[622]
5 acres of pasture in Colmanhedge Field.[622]
A close called Conduit Close, of five acres.
A close called Marshland.
A messuage called The White Hart, and 18 acres of pasture thereto
belonging.
A messuage called The Rose, and a pasture thereto belonging.
A messuage called The Vine.
Reserved were the church and rectory of Feltham, and all
glebes, tithes, etc., belonging thereto.
Of the lands and houses above-mentioned, only the last four
were in the parish of St. Giles, and three of them have already been
dealt with. The Vine was on the north side of High Holborn, and its
site, with that of the close behind, is now marked by Grape Street,
formerly Vine Street.
Dudley.
Very shortly afterwards, Sir Thomas Legh, the notorious
visitor of the monasteries, made a determined effort to gain
possession of the Hospital of Burton Lazars,[623] and obtained from Thomas
Radclyff, then master, the next advowson of the Hospital for his life. This
was confirmed in March, 1536–7, by Letters Patent.[624] In 1539 the
Hospital was dissolved, and its possessions reverted to the Crown. Legh,
however, for several years continued to hold the property, and enjoy the
profits, spiritual and temporal, until on 6th May, 1544, the King granted to
Sir John Dudley, Viscount Lisle, the Hospital with all its possessions in
Leicestershire, St. Giles-in-the-Fields, and elsewhere. Very naturally, this
resulted in “contencion, varyence and stryfe” being “reysed, stirred and
dependyng betweene the said Viscount Lisle ... and the said Sir Thomas
Legh ... of for and aboute the right, tytle, interest, occupation and
possession of the seyd late Hospytall,” and the Lord Chancellor, Lord
Wriothesley, was appointed arbitrator to settle the matter.
In the course of the same year (1544) Wriothesley gave his award,
dividing the property between the two claimants, but as the arrangement
was never completed it is not necessary to give details here.[625]
It appears that when the award in question was being obtained, Lord
Lisle was absent from the country, “beinge occupied in the parties beyond
the see in and aboute the Kynges Majesties affaires concernynge his
warres,” and on his return refused to carry out the decree, claiming that “the
veray trewe and hoole tytle of the seyde Viscounte of and in the premysses”
had not been disclosed. On 24th November, 1545, Sir Thomas Legh died,
[626] leaving as his sole heir a daughter, Katherine, aged five years. His
widow, Joan, pressed for the execution of the award, and eventually on 8th
March, 1545–6, a further decree[627] was made modifying the former. In
accordance therewith an indenture[628] was on 24th March drawn up
between Lord Lisle and Dame Joan Legh, providing for the transfer to the
latter during her life, with remainder to Katherine, of the undermentioned
property.
“All those messuages, houses, and buyldinges, landes and tenements
callyd the Spyttell howses, with all the orchards, gardens thereunto
adjoyning.”
A close called St. Giles’ Wood.[629]
The Chequer.[630]
4 cottages in the occupation of John Baron.
11 cottages in the occupation of William Wilkinson.
The Maidenhead,[703] with a garden.
The Bear and 2 cottages adjoining.
Bear Close and Aldwych Close.
The George.[703]
A “mese” in the occupation of John Smith.
The Angel.
6 cottages in the occupation of William Hosyer.
The King’s Head.[703]
2 cottages near The Greyhound.
Rents from The Crown and a brewhouse.
The tithe of two fields[631] in Bloomsbury.
13 cottages in St. Andrew’s, Holborn.
The Round Rents[632] and other tenements and cottages in St.
Andrew’s, Holborn.
Lands in Essex, Sussex, Northampton, York, Northumberland and
Norfolk.
Rents from a large number of properties in the City of London, St.
Clement Danes, etc.
In Lord Lisle’s hands remained:—
“The capitall house of the seyd late Hospitall of Seynte Gyles in the
feldes and all the stables, barnes, orchards and gardeyns thereunto
adjoyninge.”
Two “meses” parcels of the same site, with orchards and gardens,
etc., late in the tenure of Dr. Borde and Master Densyll.
A close of 16 acres lying before the Great Gate, in the occupation of
Master Magnus.
A close lying within the precinct, commonly called the Pale Close.
A close of 20 acres called The Newlands.[633]
A piece of ground called The Lane.[633]
Certain lands in Norfolk.
Lisle retained the property only for a few months, selling it in the
same year[634] (1546) to John Wymond Carew, (afterwards Sir Wymond).
Sir Wymond died on 23rd August, 1549, when he was found[635] to be seized
of “and in the capital mansion of the Hospital of St. Giles-in-the-Fields and
of and in certain parcels of land with appurtenances in the parish of St.
Giles-in-the-Fields ... in his demesne as of fee.”
In December, 1561, his widow, Dame Martha Carew, gave up, in
return for an annuity, to his son Thomas “all those lands, tenements, rents,
hereditaments, etc., lieing and being in St. Gyles and Maribone, nere
London, late belonging to Burton Lazar, which she holds by way of
jointure”;[636] and Thomas sold them to Francis Downes. On the latter’s
death in 1564 they were particularised[637] as four messuages, and four
acres of pasture in St. Giles, and 20 acres of pasture in St. Marylebone.
Although the manor of St. Giles is not mentioned, it
must have been included in the portion assigned to Katherine
Legh, for it is found afterwards in her possession. Sir
Thomas’s widow died on 5th January, 1555–6[638] (having
previously remarried[639]), leaving Katherine in her sixteenth
year. Such a desirable prize was not likely to remain long in
the matrimonial market, and a husband was soon found in
Blount.
the person of Sir James Blount, Lord Mountjoy. Blount’s life
seems to have been one of continual financial worry, and his
mortgages and recognisances figure very prominently in the Close Rolls of
the period.[640]
The date of his marriage with Katherine Legh is not known precisely,
but it was certainly within 13 months of the death of her mother.[641] By
degrees the greater portion of Lady Katherine’s inheritance was converted
into ready money, and among other transactions, the manor of St. Giles was
on 18th July, 1565, mortgaged to Robert Browne, citizen and goldsmith of
London, and Thomas his son.[642] The mortgage was never redeemed,[643]
and on 20th June, 1579, Thomas Browne parted with the manor to Thos.
Harris, who in turn sold it on 12th February, 1582–3, to John Blomeson.
Blomeson retained it for nine years, and on 3rd May, 1592, sold it to “Walter
Cope, of the Strand, Esq.,”[644] afterwards Sir Walter Cope.[645] On his death
in 1614, the manor came into the possession of his daughter and sole
heiress, Isabella, who married Sir Henry Rich, and on 2nd April, 1616, it was
sold to Philip Gifford and Thos. Risley, in trust for Henry, third Earl of
Southampton.[646]
On the death of the fourth earl in 1668, it became the
property of his daughter, Lady Rachel Russell, from whom it
descended to the Dukes of Bedford, who now hold it.
Russell.
LIV.—THE CHURCH OF ST. GILES-IN-THE-
FIELDS.
First Church.
In a book,[647] now in the possession of the Holborn
Metropolitan Borough Council, containing a number of extracts
apparently copied from an earlier volume, is the copy of a document
dated 26th January, 1630–31, in which it is stated that Queen Maud,
about the year 1110, here built a church “pulchram satis et
magnificam,” and called it by the name of St. Giles-in-the-Fields. It is
possible that the statement is merely based on the fact of the
foundation of the hospital, including the church, at about that date.
Although there is no record of any presentation to the living
before the Hospital was suppressed in 1539, the fact that the parish
of St. Giles was in existence at least as early as 1222[648] necessitates
the assumption that the church was partially used for parochial
purposes. After the suppression of the Hospital the whole fabric
became parochial.
The earliest institution that has been found to[649] this church
is dated 20th April, 1547, and was at the presentation of Sir Wymond
Carew. On the next occasion (1571) the privilege was exercised by
Queen Elizabeth, and since that time the patronage has always been
in the hands of the Crown.
Very little information remains as to the architectural
character of the church (whether the original structure or not) at the
time of the dissolution.[650]
Besides the high altar there must have been an altar to the
patron saint, St. Giles. There is also evidence of the existence of a
chapel of St. Michael, for in the 46th year of Henry III. Robert of
Portpool bequeathed certain rents to provide for the maintenance of
a chaplain “to celebrate perpetually divine service in the chapel of St.
Michael, within the hospital church of S. Giles.”[651]
According to an order of the Vestry of 8th August, 1623, there
then existed a nave and a chancel, both with pillars, clerestory walls
over, and aisles on either side.
The Vestry minutes of 21st April, 1617, record the erection of a
steeple with a peal of bells, but from the fact that “casting the bells” is
mentioned as well as the buying of new bells, and from the reference
to it in the following year (9th September, 1618) as “the new steeple,”
it seems probable that something of the kind had existed before.
Parton[652] says that there was in early times a small round bell tower,
with a conical top, at the western end of the church, but his authority
for the statement is very doubtful.
The size of the church, measured within the walls, was 153 feet
by 65 feet.[653]
Second Church.
The church was, in the early years of the 17th century, in
danger of falling, as indeed some of it did, causing a void at the upper
end of the chancel “which was stored with Lumber, as the Boards of
Coffins and Deadmen’s Bones.” A screen was erected at the expense
of Lady Dudley “to hide it from the beholders’ eyes, which could not
but be troubled at it.”[654] A further collapse caused the parishioners
to decide to erect a new church. This was begun in 1623 and finished
in 1631. The cost of building amounted to £2,068, all of which, with
the exception of £252 borrowed, was obtained from voluntary
offerings. The largest contributor was Lady Dudley, who gave £250,
and, in addition, paid for the paving of the church and chancel. A
small sketch of the church is given by Hollar in his plan of 1658
(Plate 3), and a lithograph (here reproduced) by G. Scharf is in
Parton’s Hospital and Parish of St. Giles-in-the-Fields.
Hatton[655] gives the length as 123 feet and the breadth 57 feet.
The church and steeple appear to have been built of rubbed brick[656],
surmounted with battlements, and coped with stone.[656] A western
gallery was erected in 1671, and others to the north and south in
1676–7.
The chancel had a large east window, and one on either side.
The nave had a window over the chancel arch, and a large one at the
west end.
There were north and south aisles, which must have been of
considerable height to admit of the galleries which were
subsequently added. They appear to have been of three bays,[657] with
two windows in each. All the windows, except the westernmost one
in the north aisle, were glazed with coloured and painted glass. There
were three doors to the church, one beneath the west window and
others under the third window from the east of the north aisle and
the westernmost window of the south aisle.
No window is mentioned by Strype at the west end of the
north aisle, so that it is probable that the tower was attached to the
church in this situation. This had battlements and was provided with
a vane.
The interior was well furnished and provided with numerous
ornaments, many of which were the gift of Lady Dudley.[658] Chief
among the latter must be mentioned an elaborate screen of carved
oak placed where one had formerly stood in the old church. This, as
stated in a petition to Parliament in 1640,[659] was “in the figure of a
beautifull gate, in which is carved two large pillars, and three large
statues: on the one side is Paul, with his sword; on the other
Barnabas, with his book; and over them Peter with his keyes. They
are all set above with winged cherubims, and beneath supported by
lions.”
The church had a pair of organs with case richly gilded, and
the organ loft was painted with a representation of the Twelve
Apostles.
Very costly and handsome rails were provided to guard the
altar. This balustrade extended the full width of the chancel, and
stood 7 or 8 feet east of the screen at the top of three steps.
The altar stood close up to the east wall, with a desk raised
upon it in various degrees of advancement.
The upper end of the church was paved with marble, and six
bells were provided in the steeple.
In 1640 the reformers were very bitterly incensed against the
rector with regard to the fittings in the church, and a petition was
presented to Parliament enumerating the various articles which were
considered superstitious and idolatrous. The result of this action was
that most of the ornaments were sold in 1643, while Lady Dudley was
still alive.
After the Restoration the church was repaired and decorated,
and a striking clock and dials added to the tower.
In 1716 the church had a very valuable addition made to its
plate in the form of an engraved gold communion cup, weighing 45
ozs., which had been purchased pursuant to the will of Thomas
Woodville, a parishioner who died at sea. This valuable chalice,
together with the rest of the sacramental and other plate, was stolen
from the vestry room in 1804.
The church was obviously not well constructed, for by 1715 it
was reported to be in a ruinous condition. Under a moderate
computation it appeared that it would cost £3,000 to put it in order.
The ground outside being above the floor of the church, caused the
air to be damp and unwholesome, and proved inconvenient in other
ways. In these circumstances it was thought better to recommend a
complete reconstruction of the church.
The parishioners accordingly petitioned that the church
should be included in the 50 new churches to be built in the cities of
London and Westminster and the suburbs, and the necessary
authority for this was eventually obtained in 1718.[660] Nothing,
however, was done until 1729, when an arrangement was come to
whereby the Parish of St. Giles agreed to make provision for the
stipend of the rector of the new parish of St. George, Bloomsbury, on
condition that the Commissioners acting under the Act of Queen
Anne should pay a sum not exceeding £8,000 for the rebuilding of
St. Giles Church. The arrangement was sanctioned by an Act of
Parliament of the same year.[661] By 1731, Henry Flitcroft had
prepared plans and entered into an agreement to begin pulling down
by 31st August of that year, and to have the new church completely
finished on or before 25th December, 1733. For this work the
architect was to receive £7,030, but in fact the contract was exceeded
by over £1,000, Flitcroft’s receipt being for £8,436 19s. 6d.[662]
Third Church.
The interior dimensions of the church are as follows: length
from the west wall to the east wall of the chancel, 102 feet; length
from the west wall of the nave to the east wall of the nave, 74 feet;
depth of the chancel, 8 feet; width of the nave and aisles, 57 feet 6
inches.
The plan is a nave of five bays with side aisles (Plate 43), over
which are galleries, these being connected by a western one in the
last bay of the nave. A shallow sanctuary is placed at the eastern end,
and at the west is the steeple and a vestibule containing the
entrances and the staircases to the galleries and tower.
The general treatment of the exterior of the church (Plates 45
and 47) is plain in character, but of pleasing effect. The walling is
faced with Portland stone rusticated (chamfered at the joints) to a
projecting band marking the gallery level. Above, the walling is of
plain ashlaring with rusticated quoins. The gallery windows have
semi-circular heads with keystones, moulded architraves and plain
impost blocks. The whole is surmounted by a bold modillion cornice,
with blocking course above.
Emphasis is given to the sanctuary by a pediment and by a
large semi-circular-headed window with panels on either side
forming a decorative composition.
The western end has a similar pediment with the tower rising
above. The central entrance doorway lacks emphasis and the
importance which its position seems to require, and is almost the
same in design as those to the vestibules facing north and south,
which are relatively unimportant. On the main frieze below the
cornice is the inscription—H. Flitcroft, Architectus.
Rising immediately behind the western pediment is the
steeple of about 150 feet in height.
Flitcroft’s able design was evidently influenced by that of
Gibbs for the neighbouring church of St. Martin-in-the-Fields, but it
lacks the vigorous character of that noble structure. The banding to
the obelisk above the belfry tends to make this feature appear
somewhat overheavy in comparison with the graceful lantern
beneath. The change from square to octagon at the clock face level is
cleverly managed, and will bear comparison with the same feature at
St. Martin’s Church.
The following extract from A Critical Review of the Public
Buildings, Statues and Ornaments in and About London and
Westminster made by Ralph in 1734, is of interest, as it gives an
opinion upon the architecture of this church shortly after its
erection:—
“The new church of St. Giles’s is one of the most simple and elegant
of the modern structures: it is rais’d at very little expence, has very few
ornaments, and little beside the propriety of its parts, and the harmony of
the whole, to excite attention, and challenge applause: yet still it pleases,
and justly too; the east end is both plain and majestick, and there is nothing
in the west to object to but the smallness of the doors, and the poverty of
appearance that must necessarily follow. The steeple is light, airy and
genteel, argues a good deal of genius in the architect, and looks very well
both in comparison with the body of the church, and when ’tis consider’d as
a building by itself, in a distant prospect.”
Ralph disliked the position of the church, and would have
altered its direction, making what is the east end the main front, and
placing it in such a manner as to have ended the vista of Broad
Street.
The interior (Plate 49) is much finer than the exterior would
suggest, and is an excellent example of a well thought-out design.
Square panelled piers rising to the underside of the galleries support
Ionic columns with block entablatures, all of Portland stone (Plate
46). These carry the roof and ceiling. The ceiling of the nave is
barrel-vaulted in form, panelled and divided into bays by mouldings.
The ceilings of the aisle-galleries (Plates 44 and 51) take the form of a
species of groined vaults intersecting the barrel ceiling of the nave.
The whole is covered by a roof of one span.
The treatment of the galleries is more than usually
satisfactory, for the fronts, instead of being housed into the columns
—giving the suggestion of a necessary after addition—rest
comfortably upon the piers supporting the columns, and, if taken
away, would mar the proportion of the columns to their pedestals.
The shallow sanctuary is almost the full width of the nave. It is
ceiled with an ornamental panelled barrel vault following that of the
nave, and the eastern wall is filled by an architectural composition
harmonising with the general treatment of the nave.
On the frieze of the altar piece (Plate 51) is carved a cherub’s
head, and above is a scrolled pediment having in the centre a pelican
feeding her young in the nest.
The lower panels on either side of the altar and of the
sanctuary, are four in number, and enclosed in carved wood frames.
Two contain pictures; that of Moses to the left (Plate 52) and of
Aaron to the right of the altar.
The pulpit is of carved oak with inlay panels. The ironwork to
the choir balustrade is of wrought work, and the old iron bound chest
in the north-west vestibule is of interest.
The organ (Plate 50) is of considerable interest, and Mr.
George E. Dunn, the organist, has been good enough to supply the
following information. The instrument was built by the celebrated
Bernard Schmidt (known as Father Smith) for the second church in
1671, when he was 41 years old. He was known chiefly for the
perfection of his diapason stops—the true organ tone—and those in
this organ are among his best specimens. When the church was
rebuilt by Flitcroft he evidently did not desire to interfere with the
organ, and adopted the unusual expedient of erecting the tower of
the new church partially round the organ; consequently the back and
part of two sides are covered by the walling of the tower. Father
Smith’s original specification remained until 1856, when many of the
stops had become decayed after 180 years’ use. Dr. G. C. Verrinder,
the organist at that time, had it restored and enlarged by Messrs.
Gray and Davidson, and further repairs and alterations were made in
1884 by the same firm, under the instructions of the late Dr. W.
Little, the organist at that date. In 1889–1900 further alterations
were made by Messrs. Henry Jones and Sons, in collaboration with
the present organist. But through all the decay and changes the
organ has undergone Father Smith’s original diapasons in the front
organ remain and are still perfect. The blowing is done by hand, but
the well-balanced lever renders this comparatively easy, while,
despite the retention of the old tracker action, the instrument is quite
free from the “rattling” so often found in these old actions. In front
are carved the royal arms of George I.
All the glass to the windows, except a small panel (Plate 52) in
the west window of the south vestibule, is modern. This fragment,
which is probably from the earlier church, represents St. Giles’s tame
hind struck by the arrow.
The majority of the monuments in the church belong to the
19th century. Those of earlier date are as follows:—
On the north-east wall of the nave is a tablet of white marble,
on a black marble slab, with the following inscription:
H. S. E.
GULIELMUS WATSON EQUES
SOCIETATIS REGALIS APUD LONDINUM,
ET COLLEGII REGALIS MEDICORUM SOCIUS,
REGALI ETIAM ACADEMIÆ MADRITENSI ADSCRIPTUS,
IN UNIVERSITATIBUS HALÆ ET VIRTEMBERGIÆ
MEDICINÆ DOCTOR
HONORIS ERGO ELECTUS
VIR SUI TEMPORIS
SCIENTIÆ INDAGATOR STUDIOSISSIMUS:
ARTIS MEDICÆ ET BOTANICÆ, NECNON PHILOSOPHIÆ
NATURALIS,
PRÆCIPUE QUOD AD VIM ELECTRICAM ATTINET
INTER PRIMOS PERITUS.
OBIIT DIE MAII 10. A.D. 1787. ÆTAT. SUÆ 72.
HOC MARMOR NEC SUPERBUM,
NEC QUIDQUAM HABENS ORNATUS:
PRAETER IPSUM EJUS NOMEN,
FILIO PIENTISSIMO LEGANTE,
TESTAMENTI CURATORES
PONI JUSSERUNT.
Above, surmounted by a crest, is placed a coat of arms:
(Argent) on a chevron engrailed (Azure) between three martlets
(Sable) as many crescents (of the first).
On the wall of the north aisle is a white marble tablet to the
memory of John Barnfather, who died on 17th September, 1793, in
the 75th year of his age. A tribute is paid to his strictness and
impartiality in the execution of his duties as a justice of the peace,
and to his “mildness of Temper and benignity of mind” in private life.
The tablet is surmounted by a mourning female figure, and fixed on
an oval slab of black marble.
A little to the west along the aisle is a tablet of black marble,
with white marble cornice and base, bearing an inscription to the
memory of other members of the same family, viz., Robert
Barnfather, who died on 23rd October, 1741, aged 54, and his wife
Mary, who died on 6th December, 1754, aged 67. A long account of
the latter’s many good qualities is contributed by “their most
Affectionate Son.”
Still further westward is a tablet with the following
inscription:—
NEAR UNTO THIS PLACE LYETH THE BODY OF
ANDREW MARVELL ESQUIRE, A MAN SO ENDOWED BY
NATURE
SO IMPROVED BY EDUCATION, STUDY & TRAVELL, SO
CONSUMMATED
BY PRACTICE & EXPERIENCE: THAT JOINING THE MOST
PECULIAR GRACES
OF WIT & LEARNING WITH A SINGULAR PENETRATION &
STRENGTH OF
JUDGMENT, & EXERCISING ALL THESE IN THE WHOLE
COURSE OF HIS LIFE
WITH AN UNALTERABLE STEADINESS IN THE WAYS OF
VIRTUE, HE BECAME
THE ORNAMENT & EXAMPLE OF HIS AGE; BELOVED BY GOOD
MEN, FEAR’D
BY BAD, ADMIR’D BY ALL, THO IMITATED ALASS! BY FEW, &
SCARCE FULLY
PARALLELLED BY ANY. BUT A TOMB STONE CAN NEITHER
CONTAIN HIS CHARACTER,
NOR IS MARBLE NECESSARY TO TRANSMIT IT TO POSTERITY,
IT WILL BE ALWAYS
LEGIBLE IN HIS INIMITABLE WRITINGS. HE SERVED THE
TOWN OF KINGSTON
UPON HULL, ABOVE 20 YEARS SUCCESSIVELY IN
PARLIAMENT, & THAT WITH SUCH
WISDOM, DEXTERITY, INTEGRITY & COURAGE AS BECOMES A
TRUE PATRIOT
HE DYED THE 16. AUGUST 1678 IN THE 58TH. YEAR OF HIS AGE.
SACRED
TO THE MEMORY OF ANDREW MARVELL ESQR. AS A
STRENUOUS ASSERTER OF
THE CONSTITUTIONS, LAWS & LIBERTIES OF ENGLAND,
AND OUT OF FAMILY AFFECTION & ADMIRATION OF
THE UNCORRUPT PROBITY OF HIS LIFE & MANNERS
ROBERT NETTLETON OF LONDON MERCHANT HIS GRAND
NEPHEW
HATH CAUSED THIS SMALL MEMORIAL OF HIM
TO BE ERECTED IN THE YEAR 1764.
Further is a tablet of white marble, in the form of an
ornamental cartouche, recording the death of John Hawford and
Elizabeth his wife, and their two sons John and William. All four
deaths occurred between December, 1712, and July, 1715.
Next is a tablet to the memory of Thomas Edwards, who died
on 9th July, 1781, in the 71st year of his age. The tablet is of white
marble, surmounted by a black cinerary urn, on an oval slab of
painted marble. The inscription records his various bequests for the
use of the poor of the parish, and explains that the monument was
erected by his widow not only as a tribute of gratitude and affection,
but with a view to inciting others “whom God has blessed with
Abilities and Success” to follow his example. Her own death, on 23rd
November, 1818, is also mentioned.
Still in the north aisle, but near the entrance, is a tomb
bearing a white marble recumbent effigy of Lady Frances Kniveton,
resting on a black marble slab above a stone base. This is one of the
two memorials preserved from the second church. The inscription,
contained on a white marble tablet, reads as follows:—
In Memory of the Right Honble. Lady Frances Kniveton,
(Wife of Sr. Gilbert Kniveton,/of Bradley, in the County of Derby
Bart.) lyeth buried in the Chancel of this Church./She was one of the
5 Daughters & Co-heirs of the Rt. Honble. Sr. Robert Dudley Kt. Duke
of the/Empire; by the Lady Alice his Wife & Dutchess. which
Robert. was Son of the Rt. Honble./Robert Dudley, late Earle of
Leicester. & his Dutchess was Daughter of Sr. Tho: Leigh,/and Aunt

Fundamentals of Corporate Finance Canadian 3Rd Edition Berk Test Bank Full Chapter PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Fundamentals of Corporate Finance Canadian 3Rd Edition Berk Test Bank Full Chapter PDF

Uploaded by

Copyright:

Available Formats

Fundamentals of Corporate Finance

Canadian 3rd Edition Berk Test Bank

10.1 A First Look at Risk and Return

3) Stocks with high returns are expected to have:

9) Why must riskier investments offer higher expected returns?

10.2 Historical Risks and Returns of Stocks

E) Rannual = (1 + R1)(1 + R2)(1 + R3)(1 + R4) + 1

Use the table for the question(s) below.

Date Price ($) Dividend ($)

Consider the following realized annual returns:

S&P 500 IBM

10.3 The Historical Tradeoff between Risk and Return

7) Which of the following statements is TRUE?

10.4 Common Versus Independent Risk

Use the information for the question(s) below.

4) What is the expected payoff for Big Cure's Blockbuster drug?

5) What is the expected payoff for Little Cure's ten drugs?

3) Investors should earn a risk premium for bearing unsystematic risk.

5) In general, it is possible to eliminate ________ risk by holding a large portfolio of assets.

Consider the following average annual returns:

9) What is the risk premium for the portfolio of small stocks?

11) What is the risk premium for corporate bonds?

16) Which of the following is a diversifiable risk?

Use the information for the question(s) below.

17) What is the expected return for an individual firm?

22) Independent risk is more closely related to:

23) What is the difference between systematic and unsystematic risk?

24) How does diversification affect systematic and unsystematic risk?

You might also like