Final answer:
The lowest average annual nominal rate of return over the 1900-2017 period is most likely to have been provided by a portfolio of Treasury bills, as they traditionally offer lower returns due to their lower risk compared to stocks and government bonds. Thus, the option b is the correct answer.
Step-by-step explanation:
The student has asked about the lowest average annual nominal rate of return for different investment types over the period from 1900-2017. Based on financial principles, we know that over a sustained period, stocks typically yield higher returns than bonds, and bonds yield higher returns than cash equivalents such as Treasury bills. This can be attributed to the inherent risk levels of each investment type, where higher risk is generally associated with the potential for higher return.
Historically, large U.S. common stocks and small U.S. common stocks should therefore have a higher average rate of return than U.S. government bonds and Treasury bills. Given that Treasury bills are considered among the safest investments with low risk and low return, it can be deduced that a portfolio of Treasury bills would have had the lowest average annual nominal rate of return during the 1900-2017 period.