1. Investors require a risk premium on all investment classes except a. Small company stocks b. Corporate bonds c. Treasury bills d. Large company stocks e. Municipal bonds Over the period of 1926-2014, which one of the following investment classes had the highest returns? 2. a. Large-company stocks b. U.S. Treasury bills c. Small company stocks d. Long-term corporate bonds e. Long-term government bonds 3. Why don't ALL investors simply purchase the investment class with the highest historical return? a. b. c. d. e. Because some investment classes require a larger initial investment Because some investment classes require a longer holding period Because the investment classes with higher returns also carry higher risk Small investors are not permitted to buy stocks or bonds Because history is unlikely to repeat itself as to the ranking of highest and lowest returns 4. The total return on a stock investment can be calculated as a. b. c. d. e. Realized return plus unrealized return Calculated return plus imaginary return Central return plus subsidiary return Dividend yield plus capital gain Company return plus investor return