1. Which statement is the most correct regarding investment returns and their level of risk?

a. Higher risk investments may provide lower actual levels of return (ex-post) than risk free investments over the short- or long-term.

b. A risk-free investment never has the highest actual return ex-post.

c. Investors should invest in risk-free assets when they want to earn the highest projected ex-ante returns over the long-run.

d. All of these answers are correct.

e. Riskier investments generally have the lower expected returns (ex-ante) than risk-less alternatives.

f. Compared to lower risk alternatives, higher risk investments always provided higher levels of return (ex-post) over the short term.

2. Stagflation is

a. the combination of high wages and low prices.

b. a combination of high inflation and low or negative economic growth that (like disco) sucks and should stay in the 1970s.

c. the combination of low unemployment and low prices.

d. a combination of high interest rates and low inflation.