Assume That Large-Company Stocks Had an Average Rate of Return

question 95

Multiple Choice

Assume that large-company stocks had an average rate of return of 18.5 percent over the past 55 years while T-bills returned an average of 2.4 percent and inflation averaged 1.8 percent.Given this, the real return on large-company stocks was:

• A)13.56 percent
• B)12.49 percent
• C)16.40 percent
• D)14.83 percent
• E)15.99 percent

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Definitions:

Unemployment and Inflation

Two key indicators in economics, where unemployment measures the percentage of the workforce that is jobless, and inflation indicates the rate at which the general level of prices for goods and services is rising.

Cost/Benefit Analysis

A systematic approach to estimating the strengths and weaknesses of alternatives, used to determine options that provide the best approach to achieve benefits while preserving savings.

Expected Benefits

The anticipated advantages or positive outcomes that are predicted to result from a particular action or policy.

Uncertain Environments

Conditions wherein the outcome of business operations is unpredictable due to changing external factors.