Which Statement Is TRUE Regarding Various Instruments in Financial Markets

question 48

Multiple Choice

Which statement is TRUE regarding various instruments in financial markets?

• A) Compared with bonds, stocks provide equity and higher risk.
• B) Compared with bonds, stocks provide higher risk and lower returns.
• C) Compared with bonds, stocks provide lower risk and higher returns.
• D) Compared with bonds, stocks provide less equity and lower risk.

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Definitions:

Consumer Surplus

The discrepancy between what consumers are ready and capable of spending for a good or service, as shown by the demand curve, and the actual amount paid by them, known as the market price.

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, due to market prices.

Total Surplus

The aggregate benefit to society, constituted by the addition of consumer and producer surplus, derived from the creation and utilization of goods and services.

Total Surplus

The aggregate of producer surplus and consumer surplus, symbolizing the complete net advantage to society through the consumption and manufacture of goods and services.