This topic contains a solution. Click here to go to the answer

Author Question: The chart below gives information for four classes of U.S. securities over the 50-year time period ... (Read 72 times)

fbq8i

  • Hero Member
  • *****
  • Posts: 527
The chart below gives information for four classes of U.S. securities over the 50-year time period from 1950-1999.
 
  Order the securities from highest average annual return to lowest for this time period. Now rank the securities from highest to lowest based on risk. Is the information consistent with what financial theory tells us? Why or why not?
  What will be an ideal response?

Question 2

If capital markets are efficient, then:
 
  A) There is no reason to believe that prices are too high or too low.
  B) It is not possible to make money by playing the stock market.
  C) Prices will adjust slowly when reacting to new information.
  D) Historical price trends will give you a good idea of where prices are headed in the future.
  E) It is possible to profit regularly from publicly available information.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

briezy

  • Sr. Member
  • ****
  • Posts: 347
Answer to Question 1

Answer: The text reports the following in Section 8.3:

Class of Security Average Annual Return
1950 - 1999 Standard Deviation
Small Stocks 17.10 29.04
Large Stocks 14.89 16.70
Long-term Government Bonds 5.94 9.49
3-Month U.S. Treasury Bills 5.23 2.98

The returns over this time period are consistent with what we expect from financial theory in that increased expected return is accompanied by increased risk. Here, we can define risk as the standard deviation or uncertainty of returns. As the table shows, the return and standard deviation of return are directly related. Students should not be required to know the exact values to complete this table; however, they should be aware of the relative levels of risk and return among the various classifications of securities.

Answer to Question 2

A




fbq8i

  • Member
  • Posts: 527
Reply 2 on: Jul 10, 2018
:D TYSM


Hdosisshsbshs

  • Member
  • Posts: 315
Reply 3 on: Yesterday
Great answer, keep it coming :)

 

Did you know?

The average adult has about 21 square feet of skin.

Did you know?

People with alcoholism are at a much greater risk of malnutrition than are other people and usually exhibit low levels of most vitamins (especially folic acid). This is because alcohol often takes the place of 50% of their daily intake of calories, with little nutritional value contained in it.

Did you know?

ACTH levels are normally highest in the early morning (between 6 and 8 A.M.) and lowest in the evening (between 6 and 11 P.M.). Therefore, a doctor who suspects abnormal levels looks for low ACTH in the morning and high ACTH in the evening.

Did you know?

About 80% of major fungal systemic infections are due to Candida albicans. Another form, Candida peritonitis, occurs most often in postoperative patients. A rare disease, Candida meningitis, may follow leukemia, kidney transplant, other immunosuppressed factors, or when suffering from Candida septicemia.

Did you know?

Malaria was not eliminated in the United States until 1951. The term eliminated means that no new cases arise in a country for 3 years.

For a complete list of videos, visit our video library