When the Annual Rate of Return on U

question 3

Multiple Choice

When the annual rate of return on U.S. Treasury bills is historically high, investors expect the risk premium on the stock market to be:

• A) considerably lower than normal.
• B) considerably higher than normal.
• C) approximately normal.
• D)approximately equal to zero.

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Definitions:

Escalating Rate GIC

A Guaranteed Investment Certificate (GIC) with an interest rate that increases at predetermined intervals throughout the term.

Fixed-rate GIC

Guaranteed Investment Certificate with a fixed interest rate for the term of the investment.

Maturity

The date on which the principal amount of a financial instrument such as a bond or loan is due to be paid in full.

Forest Industry

The sector involved in the management, conservation, harvesting, processing, and sales of forests and forestry products.