Final answer:
The correct order from most to least risky based on risk and return is: common stock, preferred stock, subordinated debentures, and secured debt. Common stock offers potentially higher returns but comes with the highest risk. Secured debt is backed by collateral and therefore carries the lowest risk with lower returns.
Step-by-step explanation:
The correct order of corporate issues based on risk and return, from most to least, is common stock, preferred stock, subordinated debentures, and secured debt.
Common stock is the most risky because shareholders are last in line to receive assets in the event of a company liquidation, after all debts have been paid. However, common stock also offers potentially higher returns through capital gains and dividends if the company does well.
Preferred stock is generally less risky than common stock as it often has a fixed dividend, but in the event of liquidation, preferred shareholders are paid out after debt holders and before common shareholders.
Subordinated debentures carry more risk than other types of debt because they are below other bonds in priority if the company goes bankrupt. However, they offer higher returns to compensate for this additional risk.
The least risky of the options are secured debts, which are backed by collateral, reducing the risk for lenders and resulting in lower returns for the capital provided.
Among these options, treasury bills are not mentioned, but they would actually represent the least risk and return as they are backed by the U.S. government and are considered very low-risk investments.