1. Which of the following assets likely has the lowest level of risk (therefore the lowest expected return)?
A) Long-term government bonds.
B) US Treasury bills.
C) Long-term corporate bonds.
D) Common stock of the small companies listed on NYSE.
2. Which of the following statements regarding dollar returns and percentage returns is incorrect?
A) If you purchased a 6% bond at par ($1,000) and one year later sold it for $1,050 after receiving the coupons, your dollar return is $80.
B) Your percentage return in A) is 11%.
C) If you purchased a stock for $50 and one year later sold it for $55 after receiving $5 of dividends, your dollar return is $10.
D) Your percentage return in C) is 20%.