Above-Normal Returns on Stock Investments Can Be Expected by Investors

question 73

Multiple Choice

Above-normal returns on stock investments can be expected by investors who

• A)possess insider information.
• B)are wealthy enough to hold the stock of many different companies in their portfolios.
• C)are risk seeking.
• D)concentrate their investments in one or two stocks.

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Definitions:

Yield

The earnings from an investment, like dividends or interest, shown as a percentage of the investment's original cost or its current market valuation.

Perpetuity

A type of financial instrument that provides an infinite stream of interest payments.

Yield

The income return on an investment, such as the interest or dividends received, expressed as an annual percentage of the investment's cost or current market value.

Zero-coupon Bond

A bond that does not pay periodic interest and is sold at a discount to its face value, with the full face value repaid at maturity.