Which One of the Following Earned the Highest Risk Premium

question 60

Multiple Choice

Which one of the following earned the highest risk premium over the period 1926-2010?

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

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Definitions:

Expected Value

A calculated average of all possible values for a random variable, reflecting the expected level of gain or loss over time for a given situation or set of outcomes.

Perfect Information

Perfect information is a situation in which all participants in a transaction have complete and identical knowledge about all aspects of the transaction, leaving no room for uncertainty.

Net Present Value

A financial metric that calculates the difference between the present value of cash inflows and outflows over a period of time.

Expected Monetary Value

A decision-making technique in project management that calculates the average outcome when the future includes scenarios that may or may not happen.