Market compensating investors

Problem 1: On average, the market compensates investors for taking

a. Nondiversifiable, aka market risk

b diversifiable risk

c. Firm-specific risk

d. None of the above

Problem 2: Since approximately 1900, historical evidence suggests that investing in common stocks has resulted in relatively high average annual returns with

a. Relatively little annual variation, i.e. low risk

b. Relatively high annual variation, i.e. high risk

c. approximately the same annual variation as bonds

d. no annual variation

e. none of the above are true

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Finance Basics: Market compensating investors
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