In Historical Data, We See That Investments with the Highest

question 50

Multiple Choice

In historical data, we see 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) Large-company stocks, small-company stocks, long-term corporate bonds, U.S.Treasury bills, long-term government bonds.
• B) Small-company stocks, large-company stocks, long-term corporate bonds, long-term government bonds, U.S.Treasury bills.
• C) U.S.Treasury bills, long-term government bonds, long-term corporate bonds, small-company stocks, large-company stocks.
• D) Large-company stocks, small-company stocks, long-term corporate bonds, long-term government bonds, U.S.Treasury bills.
• E) Small-company stocks, long-term corporate bonds, large-company stocks, long-term government bonds, U.S.Treasury bills.

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Definitions:

Seller

An individual or entity that offers goods or services in exchange for payment, playing a crucial role in the dynamics of supply and demand in a market.

Market

A system or arena where buyers and sellers interact to trade goods, services, or resources.

Equilibrium Price

The price at which the quantity of a good demanded by consumers equals the quantity supplied by producers, leading to market stability.

Tax

A compulsory financial charge or other levy imposed on an individual or a legal entity by a governmental organization.