Question

Rank the following investments from lowest to highest, for overall historical returns experienced by investors over long periods of time:

a. Treasury Bills
b. AAA Rated Corporate Bonds
c. Common Stocks

Answer 1

1. Treasury Bills
2. AAA Rated Corporate Bonds
3. Common Stocks

Step-by-step explanation:

Treasury Bills are considered risk-less investments. As a result the interest rate will not be adjusted for risk and will be relatively low compared to other securities. It will give the lowest return overtime here.

AAA Rated Corporate Bonds are the highest rated Corporate bonds there are. Even still, they will pay an interest rate that has a little risk premium in it which will make its returns overtime higher than a T-bill.

Common Stocks will provide the highest rate of return overtime on average simply because as well as the dividend payments that are paid to holders, the stock also has a chance of rising in value overtime which will give the holder a Capital gain as well. Something that the other 2 investments cannot give.