The Total Annual Returns on Large Company Common Stocks Averaged

question 39

Multiple Choice

The total annual returns on large company common stocks averaged 12.3% from 1926 to 2011,small company stocks averaged 17.4%,long-term government bonds averaged 5.8%,while Treasury Bills averaged 3.8%. What was the average risk premium earned by long-term government bonds,and small company stocks respectively?

• A) 1.8%; 13.3%
• B) 2.0%; 13.6%
• C) 4.4%; 11.9%
• D) 9.5%; 1.8%
• E) None of these.

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Definitions:

Direct Labor Costs

These are the wages paid to workers who are directly involved in manufacturing or producing a product.

Predetermined Overhead Rate

The predetermined overhead rate is a calculated rate used to allocate manufacturing overhead to individual units of production. It is based on estimated costs and expected activity levels.

Fixed Manufacturing Overhead

The portion of the total manufacturing overhead costs that does not vary with the level of production, including costs such as rent, property taxes, and salaries of permanent staff.

Work in Process

Partially completed goods that are still in the production process at the end of an accounting period.