Question 4 10 Marks

Do you agree or disagree with the following statements? Explain.

4.1. The best forecast of future returns on the stock market is the average over the past ten years of historical returns. (4)

4.2. Because stocks offer a higher return over the long term than bonds, all rational investors should prefer stocks. (3)

4.3. Because a government bond is considered risk-free, that means an investor would never suffer a loss