Over the Past 87 Years, We Have Observed That Investments

question 130

Multiple Choice

Over the past 87 years, we have observed 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) Small-company stocks, long-term corporate bonds, large-company stocks, long-term government bonds, U.S. Treasury bills.
• B) Large-company stocks, small-company stocks, long-term corporate bonds, U.S. Treasury bills, long-term government bonds.
• C) Small-company stocks, large-company stocks, long-term corporate bonds, long-term government bonds, U.S. Treasury bills.
• D) U.S. Treasury bills, long-term government bonds, long-term corporate bonds, small-company stocks, large- company stocks.
• E) Large-company stocks, small-company stocks, long-term corporate bonds, long-term government bonds, U.S. Treasury bills.

Understand the importance of saving rates in the economy and factors affecting them.

Conceptualize how economic policies and household decisions influence saving and consumption patterns.

Understand the relationship between savings rate and economic conditions across different countries and time periods.

Comprehend the concepts of Average Propensity to Consume (APC) and Average Propensity to Save (APS).

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