Closer Look

To illustrate the variability of the different investments, Figures 12.5 through 12.8 plot the year-to-year percentage returns in the form of vertical bars drawn from the horizontal axis. The height of the bar tells us the return for the particular year. For example, looking at the long-term government bonds (Figure 12.7), we see that the largest historical return (44.44 percent) occurred in 1982. This was a good year for bonds. In comparing these charts, notice the differences in the vertical axis scales. With these differences in mind, you can see

3In other words, the scale is logarithmic.

Ross et al.: Fundamentals of Corporate Finance, Sixth Edition, Alternate Edition

V. Risk and Return

12. Some Lessons from Capital Market History

© The McGraw-Hill Companies, 2002

PART FIVE Risk and Return

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