The Average Annual Return Over the Period 1886-2006 for Stocks

question 17

Multiple Choice

The average annual return over the period 1886-2006 for stocks that comprise the S&P 500 is 10%,and the standard deviation of returns is 20%.Based on these numbers,what is a 95% confidence interval for 2007 returns?

• A)-15%,25%
• B)-20%,40%
• C)-30%,50%
• D)-30%,40%

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Definitions:

Deferred Tax Liability

A tax obligation that arises when there are temporary differences between the book value and the tax value of assets and liabilities.

Deferred Tax Asset

A Deferred Tax Asset arises when a company pays more tax to the government than it owes in its financial statements, which can be used to reduce tax liability in future periods.

Adjusted

Refers to the modification of financial statements to provide a more accurate picture by removing the effects of non-recurring transactions or events.

Permanent Differences

Differences between taxable income and accounting income that are not temporary and hence do not reverse over time.