Question

the idea that investors, on average, have earned a higher return from common stocks than from treasury bills supports the view that:

Answer 1

The idea that investors on average have earned a higher return from common stocks than from Treasury bills supports the view that: there is a relationship between risk and return.

Which investment kind normally yields the highest return?

Stocks have historically yielded investments with the highest average rate of return. However, stock is one of the riskiest investments because there are no assurances of earnings when you purchase shares.

What is the relationship between an investment's risk and projected return?

The return needed to entice investors to buy an asset is higher the riskier the investment is, and vice versa. It is clear from the link between risk and return that investors are risk averse; they need HIGHER rates of return to be persuaded to invest in riskier securities.

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