Question

volatility is likely to be highest in which of the following investments? multiple choice common stocks corporate bonds treasury bonds preferred stock

Answer 1

Common stocks are likely to have the highest volatility among the investment choices listed due to their susceptible value to significant changes in a short period and the potential for high returns. The correct answer is Common stocks.

Step-by-step explanation:

When evaluating which investment is likely to have the highest volatility, we must consider the inherent risk and potential return associated with each type. Common stocks have the highest volatility, as their value can significantly grow or decline in a short period, as seen with the S&P 500's fluctuations in 2008 and 2009.

Corporate bonds and treasury bonds, while still subject to market changes, generally have less volatility when compared to stocks. Preferred stock, although it may offer more stability than common stocks, still tends to be more sensitive to market changes than bonds. Therefore, common stocks are typically considered the most volatile investment among the options provided. This high volatility is offset by the potential for high returns, which attracts investors despite the associated risks.