Based on Historical Performance, Which One of the Following Investments

question 107

Multiple Choice

Based on historical performance, which one of the following investments is most apt to provide an average return of 10 percent a year between now and the year 2025?

• A) U.S. Treasury bills
• B) Corporate bonds
• C) Stocks
• D) Options
• E) Zero-coupon bonds

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Definitions:

Floating Exchange Rate

A currency's value that is determined by the foreign exchange market depending on supply and demand relative to other currencies, rather than a fixed value set by a government.

Purchasing Power Parity

An economic theory that compares different countries' currencies through a "basket of goods" approach, aiming to determine the adjustments needed to make the exchange rates of two currencies equal.

Basket of Goods

Is a selected set of products and services whose prices are tracked to measure inflation or cost of living changes in an economy over time.

Equilibrium Exchange Rate

The exchange rate at which the demand for a currency exactly matches its supply, resulting in stable market conditions without the need for official intervention.