Use the Following Historical Average Returns and Standard Deviations to Answer

question 113

Multiple Choice

Use the following historical average returns and standard deviations to answer the question below. What is the historical risk premium of Canadian common stocks over long bonds?

• A) 7.15%
• B) 7.16%
• C) 5.56%
• D) 1.60%
• E) 8.75%

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Definitions:

Convertible Bond

A type of bond that can be converted into a predetermined amount of the issuing company's equity at certain times during its life.

Contract Rate

A predetermined fixed rate in a contract used to calculate payments, often found in finance agreements.

Effective Rate

The actual interest rate an investor receives or pays on a loan or investment, taking into account the compounding of interest.

Callable Bond

A type of bond that can be redeemed by the issuer before its maturity date at a predetermined call price.