Final answer:
Stocks historically provide higher average returns than bonds due to their greater risk and potential for reward. Corporate bonds offer higher interest rates than Treasury bonds but less than stocks, while Treasury bonds offer more stability but lower returns compared to corporate bonds and stocks.
Step-by-step explanation:
Historically, stocks have higher average returns than bonds, whether corporate or Treasuries. This is due to the inherent nature of stocks and bonds; stocks are equity stakes in companies and carry greater risk but also the potential for greater returns. Conversely, bonds are debt instruments that provide regular interest payments and tend to have lower risk compared to stocks. This is reflected in their returns as well. For example, the S&P 500 index which is a representation of the stock market experienced a significant increase of 26% in 2009, after a sharp decline of 37% in 2008. Meanwhile, bond values, which are influenced by interest rate fluctuations, present less volatility than stocks but more than a savings account. While corporate bonds typically offer higher interest rates than Treasury bonds due to the higher risk of default, they, along with Treasury bonds, generally offer more stable returns than stocks but at a lower rate.