From 1950 to 2007, the Average Return in the Stock

question 75

Multiple Choice

From 1950 to 2007, the average return in the stock market, as measured by the S&P500, was 13.2% and a standard deviation of 17%. Given this information, which of the following statements is correct?

• A) With an average return this high, it is unlikely that an investor will lose money in the stock market in the next year or two.
• B) With a standard deviation this high, it is likely that an investor will lose money in some years over a 25-year investment period.
• C) This investment is not very good since the standard deviation is greater than the average return.
• D) All of these statements are correct.

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