In Historical Data, We See That Investments with the Highest

question 22

Multiple Choice

In historical data, we see that investments with the highest average annual returns also tend to have the highest standard deviations of annual returns. This observation supports the notion that there is a positive correlation between risk and return. Which of the following answers correctly ranks investments from highest to lowest risk (and return) , where the security with the highest risk is shown first, the one with the lowest risk lastσ

• A) large-company stocks, small-company stocks, long-term corporate bonds, u.s. treasury bills, long-term government bonds.
• B) small-company stocks, large-company stocks, long-term corporate bonds, long-term government bonds, u.s. treasury bills.
• C) u.s. treasury bills, long-term government bonds, long-term corporate bonds, small-company stocks, large-company stocks.
• D) large-company stocks, small-company stocks, long-term corporate bonds, long-term government bonds, u.s. treasury bills.
• E) small-company stocks, long-term corporate bonds, large-company stocks, long-term government bonds, u.s. treasury bills.

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Definitions:

Statistically Significant Difference

A measurement indicating that an observed effect or difference in a study is unlikely to have occurred by chance.

Two Independent Groups

In statistical analysis, two groups of subjects that are randomly assigned and do not influence each other.

Paired Samples T-Test

A statistical test used to compare the means of two related groups to ascertain if there is a significant difference between them.

Productivity

The efficiency at which production inputs, such as labor and capital, are turned into outputs, often measured as the ratio of output to input over a specific period.