Which of the following financial instruments entails the most risk and potentially the highest returns for investors?

Question

Quizplus · Accepted Answer

Ordinary shares entail the most risk as their value is directly tied to the performance of the company and can fluctuate greatly. However, they also have the potential for the highest returns if the company performs well and the share price increases. Debt with a maturity of less than one year and bonds typically have lower returns and lower risk compared to ordinary shares. Preference shares have lower risk compared to ordinary shares but also have lower returns.

Which of the Following Financial Instruments Entails the Most Risk