Multiple Choice
If a company's chart currently displays Net Sales, which of the following data series should be added to the chart to represent Gross Profit?
101
views
4. Merchandising Operations
Net Sales
Multiple Choice
Over time, the average rate of return on stocks is typically:
A
Higher than the average rate of return on bonds
B
Lower than the average rate of return on savings accounts
C
Equal to the average rate of return on Treasury bills
D
Zero, due to market fluctuations
Verified step by step guidance1
Understand the concept of 'average rate of return': This refers to the average annual profit or loss generated by an investment over a period of time, expressed as a percentage of the initial investment.
Compare the risk and return characteristics of different investment types: Stocks generally have higher risk compared to bonds, savings accounts, and Treasury bills, but they also tend to offer higher returns over the long term to compensate for the increased risk.
Analyze historical data: Historically, stocks have provided higher average rates of return compared to bonds, savings accounts, and Treasury bills. This is due to their potential for capital appreciation and dividend payments.
Consider market fluctuations: While stocks are subject to market volatility, their long-term average rate of return is typically positive and higher than other investment types mentioned in the problem.
Conclude based on financial principles: The correct answer is 'Higher than the average rate of return on bonds,' as stocks generally outperform bonds and other safer investments over time in terms of average rate of return.
Related Videos
Related Practice
