Stocks and bonds

What is the general (in words) relationship between risk and return?

(b) Interest is said to drive the stock market. But interest is paid on bonds and loans while stocks pay dividends, never interest. It would seem that interest has nothing to do with the stock market. Explain this apparent contradiction.

The cost of tuition at a public university was $200 per credit hour 5 years ago. The cost today (exactly 5 years later) is $268. The annual rate of increase is closest to:

a. 4%

b. 6%

c. 8%

d. 10%

The time it would take for money to double at a simple interest rate of 5% per year is closest to:

a. 10 years

b. 12 years

c. 15 years

d. 20 years


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