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1.
As you hold a stock for year after year, the variation on its expected return typically _______.
Decreases. For statistical reasons, this is normal over time, and it is one of the benefits of investing over the long term.
2.
The average yearly difference between the high and low of the typical stock is between _______.
30% and 50%. The average yearly difference between the high and low of a typical stock is between 30% and 50%. In other words, over the short term, a stock can be quite volatile.
3.
Stockholders have more exposure to the potential growth of a company than bondholders do.
True. This is due to the fact that their returns are not fixed and can increase vastly.
4.
Well-known stocks like General Motors _______.
Can underperform the stock market. Just because a stock is well known does not mean it's a good investment. General Motors has often underperformed the stock market during the last 40 years.
5.
A very promising company is seeking investors. It is paying a 7% interest rate on its bonds, and it is also selling stock. Historically and statistically speaking, which would be the best bet for an investor?
The stock. Although we cannot predict the future, the stock would statistically be the best bet. Still, it is best to study the company's financials before investing.
