Last year, T-bills returned 2 percent while your investment in large-company stocks earned an average

1.

Last year, T-bills returned 2 percent while your investment in large-company stocks earned an average of 5 percent. Which one of the following terms refers to the difference between these two rates of return?    A.  risk premium B.  geometric return C.  arithmetic D.  standard deviation E.  variance Refer to section 12.3

2.

Which one of the following best defines the variance of an investment's annual returns over a number of years?    A.  The average squared difference between the arithmetic and the geometric average annual returns. B.  The squared summation of the differences between the actual returns and the average geometric return. C.  The average difference between the annual returns and the average return for the period. D.  The difference between the arithmetic average and the geometric average return for the period. E.  The average squared difference between the actual returns and the arithmetic average return. Refer to section 12.4

3.	Standard deviation is a measure of which one of the following?    A.  average rate of return B.  volatility C.  probability D.  risk premium E.  real returns Refer to section 12.4