Jenna receives an investment newsletter that recommends that she invest in a stock that has doubled the return of the S&P 500 in the last two months.It also claims that this stock is a "safe bet" for the future.Which of the following statements is correct regarding this information?
A) This investment newsletter is most likely correct because they most likely have some special knowledge about the stock.
B) The investment newsletter contains contrary information since the stock must be a high risk and therefore cannot also be a "safe bet."
C) It is common for individual stocks to double the return of the S&P 500 and still be a "safe bet."
D) None of the statements are correct.

Question

Quizplus · Accepted Answer

While the newsletter claims the stock is a "safe bet" for the future, the fact that it has doubled the return of the S&P 500 in just two months suggests that it is a high-risk investment. It is not common for individual stocks to double the return of the S&P 500 in such a short time frame without a high level of risk involved. Therefore, the statement in the newsletter contains contrary information.

Jenna Receives an Investment Newsletter That Recommends That She Invest