INVESTMENTS-CONNECT PLUS ACCESS
INVESTMENTS-CONNECT PLUS ACCESS
11th Edition
ISBN: 2810022611546
Author: Bodie
Publisher: MCG
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Chapter 1, Problem 14PS
Summary Introduction

To state: Why one should invest in Treasury bills if the rate of return on investments in large stocks outpaced that on treasury bills.

Introduction: People who reap benefits in the future by sacrificing current consumption make investments with the available money.

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You invested in long-term corporate bonds and earned 6.1 percent. During that same time period, large-company stocks returned 12.6 percent, long-term government bonds returned 5.7 percent, U.S. Treasury bills returned 4.2 percent, and inflation averaged 3.8 percent. What average risk premium did you earn? Is this good or bad and why?
Suppose that the value of an investment in the stock market has increased at an average compound rate of about 5% since 1904. It is now 2016 a. If someone invested $1,000 in the stock market in 1904, how much would that investment be worth today? (Do not round intermediate Calculations)
If inflation unexpectedly rises by 3%, would a corporation that had recently borrowed money by issuing fixed-rate bonds to pay for a new investment benefit or lose?
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