Question

which of the following statements about length of investment is correct?
a. bonds tend to be better long - term investments than stocks because bonds are unlikely to lose their value.
b. stocks tend to be better long - term investments than bonds because bonds do not have the same growth potential that stocks do.
c. bonds tend to be better long - term investments than stocks because bonds, unlike stocks, are guaranteed to keep up with inflation.
d. stocks tend to be better long - term investments than bonds because stocks can be bought and sold more readily than bonds.
please select the best answer from the choices provided
a
b
c

Explanation:

• Option a is incorrect: Bonds can lose value due to interest rate changes, inflation, or issuer default.
• Option c is incorrect: Bonds are not guaranteed to keep up with inflation; fixed coupon payments can lose purchasing power over time.
• Option d is incorrect: While stocks are often more liquid, liquidity does not make them better long-term investments; growth potential is the key long-term factor.
• Option b is correct: Historically, stocks have significantly higher long-term growth potential than bonds, driven by corporate earnings growth, making them superior for long-term wealth building.

Answer:

b. Stocks tend to be better long-term investments than bonds because bonds do not have the same growth potential that stocks do.