Question

ver the past 8p yeaur, we hare observed that eswthe highest anwerage snuaeturns als tend to have the highest standard deviations of amancal eturns there is a positive cormelation betiween risk and return. Which oaf the folowing ansmers correctly ranks investments from bichest to lomest risk (and returm), where the security m first, the one with the lowest risk last? a. Sma/onpany stods, kng term corporate bone, lanpecompany stods. Ingtem governmet bonds, us. &.Large-company stocks, small-company stocks, long term corporate bonds,U.S. Treasury blls long-term government bonds Treasury bills C.Small-company stocks, larpe-company stocks, long-term corporate bonds, long-term govemment bonds Uu.s. Treaury be Od. Large-company stocks, smal- company stocks, long-tem corporate bonds, long-term government bondy, U.S. Treasury bll O e u.s. Treasur bis, long-tem gvemment bond, long-torm corporate bond, omal company stodks, arge-company stocks

Answer 1

The Correct answer is option C: Small-company stocks,large-company stocks,long-term corporate bonds, long-term government bonds, U.S. Treasury bills.

Explanation: Stocks are of higher risk as compared to bonds. Stocks in small companies are more riskier than stocks in larger companies. Hence we can say that corporate bonds are more riskier than government bonds. Long-term government bonds are riskier than short term government bonds.