Which of the following statements is true?
A) The expected return and standard deviation of return are greater for common stock than for U.S. Treasury bills.
B) The expected return on common stocks is greater than the expected return on U.S Treasury bills, but the standard deviation of return for common stocks is less than the standard deviation of return for U.S. Treasury bills.
C) The expected return on common stocks is less than the expected return on U.S Treasury bills, but the standard deviation of return for common stocks is greater than the standard deviation of return for U.S. Treasury bills.
D) The expected return and standard deviation of return are less for common stocks than for U.S. Treasury bills.

Question

Quizplus · Accepted Answer

Common stocks typically offer higher expected returns than U.S. Treasury bills due to the higher risk associated with stocks. This higher risk is also reflected in a greater standard deviation of returns for stocks compared to the relatively safe and lower-return U.S. Treasury bills.

Which of the Following Statements Is True