Question

Which of the following statements is true?
a.
Bonds have more risk than stocks, but offer more return.
b.
Stocks have more risk than bonds, but offer more return.
c.
Stocks tend to offer a greater risk, while bonds tend to offer a greater return.
d.
Bonds tend to offer a greater risk, while bonds tend to offer a greater return.

Answer 1

Correct answer: b.

Explanation: Stocks (equities) are generally more volatile and risky because they represent ownership and returns depend on business performance. Bonds (debt) pay contractual interest and have priority in bankruptcy, so they tend to be less risky but offer lower expected returns over the long run.