Which of the Following Statements Is True

question 67

Multiple Choice

Which of the following statements is true?

• A) Because expected returns on stocks exceeds expected returns on bonds, stocks should actually outperform bonds in any given year.
• B) Because expected returns on stocks exceeds expected returns on bonds, it is more reasonable to expect that stocks will outperform bonds in any given year.
• C) Expected return is the return one will actually receive.
• D) Both (a) and (c)
• E) All of the above statements are true.

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Definitions:

Nominal Annual Rate

The interest rate stated on a loan or financial product, not adjusting for inflation or the compounding of interest within that year.

Expected Annual

Refers to the anticipated yearly financial performance or returns, often used in the context of earnings, returns, or income.

Inflation

The rate at which the general level of prices for goods and services is rising, eroding purchasing power.

Time Value

The difference between the current value of the option and the value of the option if it were immediately exercised.