From 1950 to 2007,the Average Return in the Stock Market,as

question 107

Multiple Choice

From 1950 to 2007,the average return in the stock market,as measured by the S&P 500,was 13.2 percent and a standard deviation of 17 percent.Given this information,which of the following statements is correct?

• A) With an average return this high, it is unlikely that an investor will lose money in the stock market in the next year or two.
• B) With a standard deviation this high, it is likely that an investor will lose money in some years over a 25-year investment period.
• C) This investment is not very good since the standard deviation is greater than the average return.
• D) All of the statements are correct.

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Definitions:

Evaluating Options

The process of examining and comparing different choices to make the best decision.

Decision-Critical Criteria

Essential and decisive factors considered critical in the evaluation and making of a decision.

Promising Option

A choice or opportunity that seems likely to lead to positive results or success.

Promising Option

A potential solution or choice that shows substantial merit or advantage.