Justify the Historic Ranking of Returns for the Following Three

question 40

Essay

Justify the historic ranking of returns for the following three categories of investment, listed from highest to lowest return: Common stocks, long-term Treasury bonds, and Treasury bills.

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Definitions:

Time Value

A concept that money available at the present time is worth more than the identical sum in the future due to its potential earning capacity.

Consumer Price Index

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.

Compound Annual

This term, when incomplete, typically refers to the compound annual growth rate (CAGR), which is a measure of the mean annual growth rate of an investment over a specified time period longer than one year.

Compounded Quarterly

The process of calculating and adding interest to the principal sum of an investment or loan on a quarterly basis, thus increasing the amount on which subsequent interest is calculated.