Question

Over the past 100 years, the rate of return on stocks has averaged about _____, and the return on bonds has averaged approximately _____.A. â10%; 5%B. 7%; 2%C. 1%; 2%D. 20%; 25%

Answer 1

Answer: B. 7%; 2%

Explanation:

0ver the past 100 years, stocks have showed a positive average return of 7% whilst bonds have shown a return of 2%. This makes sense because stocks generally offer higher returns than bonds which are fixed.

Stocks react to a variety of factors including interest rates and market fluctuations which makes them more risky whereas bonds which are fixed income securities are more stable in their returns making them less of a risk.

Stocks therefore offer a higher return to compensate for this risk as opposed to bonds.