If you were required to estimate the average return for one category of securities for the coming year, history tells us that you should have the greatest degree of confidence estimating which of the following? A) Long-term government bondsB) 3-month U. S. Treasury billsC) Small-company stocksD) Large-company stocks

Question

Lillianna Wright

Business

4 March, 10:05

If you were required to estimate the average return for one category of securities for the coming year, history tells us that you should have the greatest degree of confidence estimating which of the following? A) Long-term government bondsB) 3-month U. S. Treasury billsC) Small-company stocksD) Large-company stocks

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Answers (1)

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Josephine Humphrey · Answer 1

3 - month U. S treasury bills (B)

Explanation:

estimating the average return of a security depends on two factors: which is the time duration of the security and the level of certainty. the longer the time duration of the security the less certain it could be to estimate its return, this is because there would be a series of fluctuations in interest rate as the time is extended and this will be a challenge with estimating a long term government bond.

Estimating a 3-month U. S treasury bill is more certain because the fluctuations of the interest rate will be minimal and easier to predict. hence the greatest degree of confidence will be exhibited in predicting the average return on 3-month U. S treasury bill.