In Historical Data, We See That Investments with the Highest

question 50

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 last?

• 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.

---

Definitions:

Self-Handicapping

A cognitive strategy where an individual sets up excuses or obstacles before a performance to have external factors to blame in case of failure.

Possible Selves

Images of what the self might become in the future.

Trait Self-Esteem

The enduring sense of worth or value that one attributes to oneself as a consistent aspect of their personality.

Self-Verification

The desire to be understood and recognized by others according to one's firmly held beliefs and feelings about oneself.