1. Among the following types of investments, small-company stocks, large-company stocks, long-term corporate bonds, long-term government bonds, and U.S. Treasury bills, which type of investment provided the largest average return in the past 90-year period? Which provided the lowest average return? Why?
2. Among the following types of investments, small-company stocks, large-company stocks, long-term corporate bonds, long-term government bonds, and U.S. Treasury bills, small-company stocks had a risk premium of 13.2 percent for the past 90 years. What does the term "risk premium" mean? Is the risk premium on small-company stocks considered to be relatively high or relatively low when compared to other investment classes? Explain why.
3. What kind of investment is considered to be risk-free?
4. What does standard deviation measure? Which type of investment discussed in class has had the highest standard deviation?