Financial planning

Suppose that a country’s annual growth rates were 5, 3, 4, 21, 22, 2, 3, 4, 6, and 3 in yearly sequence over a 10-year period.

What was the country’s trend rate of growth over this period?

Which set of years most clearly demonstrates an expansionary phase of the business cycle?

Which set of years best illustrates a recessionary phase of the business cycle?

The extra return that stocks earn over bonds (on average) compensates stockholders for

a. the greater market risk that stockholding entails.

b. the greater firm-specific risk that stockholding entails.

c. the higher taxes levied on stockholders.

d. the higher brokerage costs incurred buying stocks.

The goal of fundamental analysis is to

a. determine the true value of a company.

b. put together a diversified portfolio.

c. predict changes in investor irrationality.

d. eliminate investor risk aversion.

Solution:

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