Why Do CDs Have Lower Rates of Return Than Stocks

question 81

Multiple Choice

Why do CDs have lower rates of return than stocks?

• A) CDs are much riskier investments than stocks.
• B) CDs are less risky than stocks.
• C) CDs are not taxed while stocks' returns are taxable.
• D) CDs are not as liquid as stocks.

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Definitions:

Fixed Selling and Administrative Expense

Overhead costs not directly tied to production, including salaries of sales personnel and office rent, that remain constant regardless of sales volume.

Cash Budget

A financial plan that estimates cash inflows and outflows over a specific period, focusing on a company's liquidity and ability to meet short-term obligations.

Budgeted Cash Receipts

Forecasted cash inflows for a certain period, accounting for all expected sources of revenue including sales, investments, and loans.

Budgeted Cash Disbursements

An estimate of all cash payments that a business plans to make over a specific period, including operating expenses and capital expenditures.