A Financial Analyst Tells You That Investing in Stocks Will

question 159

Multiple Choice

A financial analyst tells you that investing in stocks will allow you to double your money in 7 years.What annual rate of return is the analyst assuming you can earn?

• A) 8.76%
• B) 9.87%
• C) 10.01%
• D) 10.41%

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Definitions:

Bonds

Debt securities issued by entities such as corporations or governments to raise capital, promising to pay back the principal along with interest on specified dates.

European-Style Option

A contract that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price on the expiration date only.

Expiration Date

The date on which an option, right, or derivative instrument becomes void and the rights under it no longer apply.

Glaxo Stock

Equity shares issued by GlaxoSmithKline, a global healthcare company, representing ownership in the company.