Capital market history shows us that the correct ordering of the average arithme
ID: 2802660 • Letter: C
Question
Capital market history shows us that the correct ordering of the average arithmetic mean return for asset classes from lowest to highest is:
Long term U.S. government bonds, U.S. Treasury Bills, small-company stocks, large-company stocks.
U.S. Treasury Bills, small-company stocks, large-company stocks, long-term government bonds.
Long term U.S. government bonds, U.S. Treasury Bills, large-company stocks, small-company stocks.
U.S. Treasury Bills, long-term government bonds, large-company stocks, small-company stocks.
U.S. Treasury Bills, long-term government bonds, small-company stocks, large-company stocks.
A.Long term U.S. government bonds, U.S. Treasury Bills, small-company stocks, large-company stocks.
B.U.S. Treasury Bills, small-company stocks, large-company stocks, long-term government bonds.
C.Long term U.S. government bonds, U.S. Treasury Bills, large-company stocks, small-company stocks.
D.U.S. Treasury Bills, long-term government bonds, large-company stocks, small-company stocks.
E.U.S. Treasury Bills, long-term government bonds, small-company stocks, large-company stocks.
Explanation / Answer
It seems that the correct option is E. This is beacuse considering Risk Premium which is a part of the yield that the investor earns, it will be lowest for T Bills and highest for Lasrge Company Stocks.