Question

During the last two centuries, after adjustment for inflation, a. corporate bonds have yielded an average annual real return of approximately 7 percent, compared to an average real return of about 3 percent for corporate stocks. b. corporate stocks have yielded an average annual real return of approximately 7 percent, compared to an average real return of about 3 percent for bonds. c. both corporate stocks and bonds have yielded an average annual real rate of return of about 3 percent. d. both corporate stocks and bonds have yielded an average annual real rate of return of about 7 percent.

Answer 1

B) corporate stocks have yielded an average annual real return of approximately 7 percent, compared to an average real return of about 3 percent for bonds.

Step-by-step explanation:

Corporate stock prices fluctuate all the time, they increase and decrease sometimes on a daily basis. But on the long run, stock prices generally show an upward tendency. While bonds have a fixed coupon rate and a specific face value.

Sometimes bonds might be sold with a slightly lower or higher interest rate, but it wouldn't vary that much. The prices of some stock may change a lot over time, e.g. Apple stock was worth around half a dollar in 1985, but its current price is almost $270.