The Histograms of the Returns on Large-Company and Small-Company Stocks

question 60

Multiple Choice

The histograms of the returns on large-company and small-company stocks for the period 1926 to 2015 show that

• A)large-company stocks never lost more than 20 percent in any one year.
• B)1945 was the best-performing year for both large-company and small-company stocks.
• C)small-company stocks most commonly return 30 to 40 percent.
• D)small-company stocks are more volatile than large-company stocks.
• E)large-company stocks are riskier than small-company stocks.

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Definitions:

Sarbanes-Oxley Act

An act that criminalizes specific nonaudit services when provided by a registered accounting firm to an audit client; also increases the punishment for a number of white-collar offenses. Also known as the Public Company Accounting Reform and Investor Protection Act of 2002.

Investment Company Act

A U.S. federal law enacted in 1940 aimed at regulating investment companies to protect investors by enforcing transparency and reducing conflicts of interest.

Finance Companies

Businesses that provide loans to individuals or corporations, excluding banks and other traditional financial institutions.

Debentures

A type of debt instrument not secured by physical assets or collateral but based on the issuer's creditworthiness and reputation.