Based on the attached data about US capital market history (Years 1926-2007) tell me: (Use Excel functions =AVERAGE and =STDEV whenever applicable)

1) Which type of asset has the largest annual average "return"?

2) Which type of asset has the largest "risk" in term of standard deviation?

3) Which type of asset has the smallest annual average "return"?

4) Which type of asset has the smallest "risk" in term of standard deviation?

5) Do such findings support the hypothesis "the greater risk is, the greater return should be"? (Please note that "inflation" in the list is not included as a type of asset.)

FIGURE 12.10 Historical Returns, Standard Deviations, and Frequency Distributions: 1926-2007 AVERAGE RETURN STANDARD DEVIATION SERIES DISTRIBUTION Large-company stocks 12.3% 20.0% Small-company stocks 17.1 32.6 Long-term corporate bonds 6.2 8.4 Long-term government 5.8 9.2 bonds Intermediate-termm 5.5 5.7 government bonds U.S. Treasury bills 3.8 3.1 Inflation 3.1 4.2 The 1933 small-company stocks total return was 142.9 percent. SOURCE: Modified from Stocks, Bonds, Bills and Inflation 2008 Yearbook, TM annually updates work by Roger G. Ibbotson and Rex A. Sinquefield Chicago: Morningstar). All rights reserved