Which of the following is a conclusion that can be drawn from the historical return data presented in this chapter?
A)An investment in individual stocks tends to be riskier than investing in a stock market index.
B)An investment in an individual stock would have provided you with a higher return than an investment in bonds, but you would have earned an even higher return by investing in
The S&P 500 Index.
C)An investment in any of the individual stocks would have provided you with higher returns than you would have earned by investing in a stock market index or in bonds.
D)Both A and C are true.

Question

Quizplus · Accepted Answer

The historical return data presented in this chapter indicates that investing in individual stocks tends to be riskier than investing in a stock market index. This is because individual stocks can have much larger fluctuations in returns due to company-specific factors, while an index is diversified across multiple stocks, which can help reduce risk. Option B is not entirely accurate, as investing in the S&P 500 Index would have provided higher returns than investing in both individual stocks and bonds. Option C is incorrect. The historical return data presented in this chapter indicates that an investment in individual stocks is generally riskier than investing in a stock market index, as individual stocks tend to have more volatility and potential for loss. This is supported by the example provided in the chapter, which compares the returns of a portfolio of individual stocks to the returns of the S&P 500 Index. While the individual stocks had higher returns in some years, they also had much larger losses in others, resulting in a lower overall return than the index. Thus, conclusion A is the best choice based on the information presented in the chapter.

Which of the Following Is a Conclusion That Can Be