In a Year in Which Common Stocks Offered an Average

question 83

Multiple Choice

In a year in which common stocks offered an average return of 18%,Treasury bonds offered 10% and Treasury bills offered 7%,the risk premium for common stocks was:

• A) 1%.
• B) 3%.
• C) 8%.
• D) 11%.

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Definitions:

Stockholders' Equity

Represents the residual interest in the assets of a corporation after deducting liabilities, essentially the net assets that belong to shareholders.

Unissued Stock

Shares that have been authorized in a company's charter but have not yet been issued to investors.

Shares

Units of ownership interest in a corporation or financial asset that provide a portion of the company's profits and losses to the shareholder.

Book Value

The net value of a company's assets minus its liabilities, often used to assess the company's worth on its balance sheet.