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

Question

Quizplus · Accepted Answer

Common stock is the financial instrument that entails the most risk and potentially the highest returns for investors. Stocks represent ownership in a company, and their value can fluctuate dramatically based on various factors such as company performance, industry trends, and economic conditions. While bonds and debt with a maturity of less than one year are generally considered safer investments, they also offer lower returns. Preferred stock is a hybrid between common stock and bonds, offering higher yields than common stock but with less potential for capital appreciation.

Which of the Following Financial Instruments Entails the Most Risk