Question

14. The average rate of return on investments in large stocks has outpaced that on investments in Treasury bills by about 8% since 1926. Why, then, does anyone invest in Treasury bills

Answer 1

Answer: They are Riskless

Explanation:

People invest in Treasury bills because they are sure that they will get a return. U.S. Treasury bills are the safest securities in the world and as such investors are essentially guaranteed their money back plus little interest.

This is in contrast with stocks which can bring great returns at one point and result in massive losses in another. Since 1926 for instance, there have been events that led to massive losses in the stock market such as the Great Depression, Black Monday and the Great Recession.

Through all those, the Treasury bills still gave people returns.