Question

In: Finance

Stocks are a risky investment. Treasury bills are highly liquid and risk free investment whose interest...

Stocks are a risky investment. Treasury bills are highly liquid and risk free investment whose interest income is not subject to state income taxes. Stocks have significantly outperformed Treasury Bills over the long term. In light of these higher returns, which best explains why an individual would invest in Treasury Bills vs. Stocks?

A. US Treasury Bills are highly liquid; exempt from state and local taxes; and have lower return than stocks

B. Preference for a very low risk investment would result in an individual choosing Treasury Bills over stocks despite lower expected returns.

C. US Treasury Bills are highly liquid and exempt from state taxes.

D. The individual may not want higher returns associated with stocks.

E. Stocks are riskier than Treasury Bills.

Solutions

Expert Solution

Answer:

US Treasury Bills are highly liquid and exempt from state taxes.

US Treasury Bills are highly liquid and exempt from state taxes.

jeff jeffy answered 2 years ago
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