The Rate of Return on Bonds Is Lower Than on Stocks

question 18

Multiple Choice

The rate of return on bonds is lower than on stocks over time because

• A) bond holders cannot diversify.
• B) bonds have a lower standard deviation in returns.
• C) stocks have less non-diversifiable risks than bonds.
• D) bonds are subject to more random risks than stocks.

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Definitions:

Net Loss

Net loss is when a company's expenses exceed its revenues during a specific period, leading to a negative profit margin.

Rent in Advance

Payment for rent that is made before the rental period begins, usually as a requirement by landlords before tenants occupy the property.

Adjusting Entry

An accounting record created at the closing of an accounting cycle to assign revenues and expenses to the relevant fiscal years.

Asset Account

An account that represents a resource owned or controlled by a business, expected to provide future economic benefits.