7. Which of the following correctly ranks the various asset classes in the United States according to their historical average risk premium (i.e. from low to high risk premium)? A. S&P 500 < long term government bonds < Treasury bills < small firms < corporate bonds B. Treasury bills < corporate bonds < long term government bonds < small firms < S&P 500 C. Treasury Bills < long term government bonds < corporate bonds < S&P 500 < small firms D. Long term government bonds < Treasury bills < corporate bonds < S&P 500 < small firms E. None of the above

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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q 7 please

6. Which of the following statements is incorrect?
A. The expected risk premium on each investment is proportional to its beta.
B. Securities with a higher market risk require a higher expected return.
C. The stock beta measures the sensitivity of a stock's return to the return on
the market portfolio.
D. If the correlation of the stock returns in your stock portfolio increases over
time, then the variance of the portfolio return will decrease over time.
E. None of the above
7. Which of the following correctly ranks the various asset classes in the United
States according to their historical average risk premium (i.e. from low to high risk
premium)?
A. S&P 500 < long term government bonds < Treasury bills < small firms <
corporate bonds
B. Treasury bills < corporate bonds < long term government bonds < small
firms < S&P 500
C. Treasury Bills < long term government bonds < corporate bonds < S&P
500 < small firms
D. Long term government bonds < Treasury bills < corporate bonds < S&P
500 < small firms
E. None of the above
Transcribed Image Text:6. Which of the following statements is incorrect? A. The expected risk premium on each investment is proportional to its beta. B. Securities with a higher market risk require a higher expected return. C. The stock beta measures the sensitivity of a stock's return to the return on the market portfolio. D. If the correlation of the stock returns in your stock portfolio increases over time, then the variance of the portfolio return will decrease over time. E. None of the above 7. Which of the following correctly ranks the various asset classes in the United States according to their historical average risk premium (i.e. from low to high risk premium)? A. S&P 500 < long term government bonds < Treasury bills < small firms < corporate bonds B. Treasury bills < corporate bonds < long term government bonds < small firms < S&P 500 C. Treasury Bills < long term government bonds < corporate bonds < S&P 500 < small firms D. Long term government bonds < Treasury bills < corporate bonds < S&P 500 < small firms E. None of the above
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