Use the Table for the Question(s)below

question 85

Multiple Choice

Use the table for the question(s) below.
Consider the following realized annual returns:
-The geometric average annual return on the Index from 2000 to 2009 is closest to:

• A)9.75%.
• B)8.75%.
• C)7.10%.
• D)8.35%.

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Definitions:

Fed

Short for the Federal Reserve, which is the central banking system of the United States, responsible for monetary policy.

Externalities

Costs or benefits that affect parties who did not choose to incur that cost or benefit, often leading to market failure if unaddressed.

Moral Hazard

A situation in which one party engages in risky behavior or lacks incentive to guard against risk because another party bears the consequences.

Moral Hazard

The situation in which one party can take risks because they know that they will not have to bear the full consequences of their actions.