In Historical Data, We See That Investments with the Highest

question 50

Multiple Choice

In historical data, we see that investments with the highest average annual returns also tend to have the highest standard deviations of annual returns.This observation supports the notion that there is a positive correlation between risk and return.Which of the following answers correctly ranks investments from highest to lowest risk (and return) , where the security with the highest risk is shown first, the one with the lowest risk last?

• A) Large-company stocks, small-company stocks, long-term corporate bonds, U.S.Treasury bills, long-term government bonds.
• B) Small-company stocks, large-company stocks, long-term corporate bonds, long-term government bonds, U.S.Treasury bills.
• C) U.S.Treasury bills, long-term government bonds, long-term corporate bonds, small-company stocks, large-company stocks.
• D) Large-company stocks, small-company stocks, long-term corporate bonds, long-term government bonds, U.S.Treasury bills.
• E) Small-company stocks, long-term corporate bonds, large-company stocks, long-term government bonds, U.S.Treasury bills.

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Definitions:

Coconuts

Tropical fruits with a hard shell, edible white flesh, and clear liquid inside, widely used for their water, milk, oil, and meat.

Fish

Aquatic animals that are a source of food, recreation, and commercial activity for humans, playing a crucial role in many ecosystems.

Unattainable Point

A situation in a production possibilities frontier or a similar model where the point representing a combination of goods or services produced cannot be achieved given current resources or technology.

Tons

A unit of weight equal to 2,000 pounds in the United States (short ton) or 2,240 pounds in the UK (long ton), often used to measure heavy commodities.