Question

The historical record for the period 1926-2019 supports which one of the following statements?

Multiple Choice 1. The inflation rate was positive each year throughout the period.
2. Small-company stocks have lost as much as 50 percent and gained as much as 100 percent in a single year.
3. There was only one year during the period when double-digit inflation occurred.
4. The return on U.S. Treasury bills exceeds the inflation rate by at least .5 percent each year.
5. When large-company stocks have a negative return, they will have a negative return for at least two consecutive years.

Answer 1

Based on the analysis below, statement 2 and statement 4 are supported by the historical record for the period 1926-2019.

Step-by-step explanation:

To determine which statement is supported by the historical record, let's analyze each statement one by one: 1. The historical record does not support this statement. The inflation rate can vary each year, and there were years with both positive and negative inflation rates. 2. The historical record supports this statement. Small-company stocks are known to be more volatile compared to large-company stocks. They can experience significant gains or losses in a single year. 3. The historical record does not support this statement. There were multiple years during the period when double-digit inflation occurred, not just one. 4. The historical record supports this statement. U.S. Treasury bills are considered low-risk investments and typically provide a return that exceeds the inflation rate by at least 0.5 percent each year. 5. The historical record does not provide enough information to support or refute this statement. It is possible for large-company stocks to have a negative return for one year or more, but it is not a consistent pattern.