Based on Data from Past Returns,a Person Age 22 Who

question 71

Multiple Choice

Based on data from past returns,a person age 22 who invests $100 per month in stocks will,by the age of 67,have

• A) less than if the person had invested in CDs.
• B) twice as much than if the person had invested in CDs.
• C) thirteen times as much than if the person had invested in CDs.
• D) one-hundred times as much than if the person had invested in CDs.

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Definitions:

Cost of Equity

The rate of return a company must offer investors to compensate for the risk of investing in its stock.

Liquidation

Liquidation is the process of winding up a company's operations and selling its assets to pay off debts, ultimately leading to the dissolution of the company.

Business Risk

The possibility that a company will have lower than anticipated profits or experience a loss rather than taking a profit.

Unsystematic Risk

A risk that affects, at most, a small number of assets. Also called unique or asset-specific risks.