Which One of the Following Is a Correct Ranking of Securities

question 84

Multiple Choice

Which one of the following is a correct ranking of securities based on their volatility over the period of 1926 to 2011? Rank from highest to lowest.

• A) large company stocks, U.S. Treasury bills, long-term government bonds
• B) small company stocks, long-term corporate bonds, large company stocks
• C) long-term government bonds, long-term corporate bonds, small company stocks
• D) small company stocks, large company stocks, long-term corporate bonds
• E) long-term corporate bonds, large company stocks, U.S. Treasury bills

Explain the role of opportunity costs, sunk costs, and fixed costs in firm decision-making and profitability.

Understand the dynamics of entry and exit in a competitive market and its impact on equilibrium.

Understand the conditions that lead to zero economic profit in the long run within perfectly competitive markets.

Describe how a firm's supply curve is determined in a competitive market.

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Definitions:

Premium Bond

Bond prices and interest rates are inversely related; that is, they tend to move in the opposite direction from each other. A fixed-rate bond will sell at par when its coupon interest rate is equal to the going rate of interest, rd. When the going rate of interest is above the coupon rate, a fixed rate bond will sell at a “discount” below its par value. If current interest rates are below the coupon rate, a fixed rate bond will sell at a “premium” above its par value.

Floating Rate Bond

A floating rate bond is a bond with a variable interest rate, which adjusts periodically according to a specified benchmark.

Variable Rate

An interest rate that can change over the period of a loan or mortgage, based on an underlying benchmark interest rate or index.

Coupon Payment

The interest payment made to bondholders, typically semiannually, as a return on investment.