The Return on an Investment in Stock

question 122

Multiple Choice

The return on an investment in stock:

• A)is subject to risk but is generally non-negative like a savings account.
• B)has a standard deviation that has historically been small relative to its average value.
• C)consists of dividend and capital gains yields.
• D)is always very risky.

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Definitions:

Portfolio Management

The science and art of making decisions about investment mix and policy, matching investments to objectives, asset allocation, and balancing risk against performance.

Rate of Return

The percentage of profit or loss on an investment over a specified period of time.

Framing Effect

The cognitive bias where people decide on options based on whether they are presented in a positive or negative way.

Extended Service

A service agreement that extends beyond the standard warranty period, offering additional protection or maintenance services.