1. Suppose your grandmother invested some money in 1925. Based on historical ret

Question

1. Suppose your grandmother invested some money in 1925. Based on historical returns from 1925 to 2015, what of the following types of securities would have given her the SECOND highest return?

a)

b)

c)

d)

e)

2.

Suppose your grandmother invested some money in 1925. Based on historical returns from 1925 to 2015, what of the following types of securities would have given her the SECOND highest return?

a)

b)

c)

d)

e)

a)

High quality long-term corporate bonds

b)

The common stock of small capitalization firms listed on NYSE

c)

The common stock of the 500 largest firms in the US

d)

US Treasury bills

e)

Long-term government bonds

Explanation / Answer

As per the given terms, the highest return will be on the Common stock of the 500 largest firms in the US since they will outperform the rest of the market. Following the same, the second highest return shall be on the high quality long term corporate bonds which will earn a higher return than Treasury bills or government bonds which offer risk free return.

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