The rate of return on bonds is lower than on stocks over time because

A) bond holders cannot diversify.
B) bonds have a lower standard deviation in returns.
C) stocks have less non-diversifiable risks than bonds.
D) bonds are subject to more random risks than stocks.


B

Economics

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Suppose that a monopoly is currently producing the quantity at which marginal revenue is less than marginal cost. The monopoly can increase its profit by

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Economics

Suppose you own a stock portfolio composed of shares in firms that are part of the financial services industry. You don't work - all you do is plan your consumption now and when you retire, and the only asset you have is your stock portfolio. In this problem, model your decisions in a graph with "consumption now" on the horizontal axis and "consumption at retirement" on the vertical. Throughout, assume that the long run rate of return of investment is r over the period from now to retirement. a. Graph your initial budget constraint - and indicate where in your graph your endowment point lies as well as what the slope of the budget constraint is. b. This morning, you woke up to find that the current financial crisis has wiped out some of the firms in your stock portfolio. As a result,

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Economics

Consider the following economic agents:

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Economics