Home / Questions / Multiple Choice: 1. Which of the following investments offered the highest overall return
Multiple Choice:
1. Which of the following investments offered the highest overall return over the past eighty years?
a. Treasury Bills
b. S&P 500
c. Small stocks
d. Corporate bonds
2. Consider the following probability distribution of returns for Alpha Corporation:
|
Current Stock Price ($) |
Stock Price in One Year ($) |
Return R |
Probability PR |
|
$35 |
40% |
25% |
|
|
$25 |
$25 |
0% |
50% |
|
$20 |
-20% |
25% |
The expected return for Alpha Corporation is closest to:
a. 6.67%
b. 5.00%
c. 10%
d. 0.00%
3. 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% |
What is the excess return for the S&P 500?
a. 5.7%
b. 7.0%
c. 0%
d. 8.4%
4. Which of the following statements is FALSE?
a. Fluctuations of a stock's returns that are due to firm-specific news are common risks.
b. The volatility in a large portfolio will decline until only the systematic risk remains.
c. When we combine many stocks in a large portfolio, the firm-specific risks for each stock will average out and be diversified.
d.The risk premium of a security is determined by its systematic risk and does not depend on its diversifiable risk
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