Question

Find the most recent (30 days) common equity return for any large company (relatively safe). Compare this return to the performance of the treasury with the same maturity. Why common equity is not a money market security? Explain why common equity is not a good choice for short-term investment.

Answer 1

I will be looking at the rate of return of Apple in the last 30 days which has been down 5% from 115 to 110 as it was running of high upon various expectation and after all those events that discounted in the price of the stock,prices corrected downwards.

The rate of return of the treasury has been 1% and this has been due to the returning of phase of uncertainty which is reflecting that equity are again becoming volatile and there has been a flowing of money into the treasuries and debt.

common equity is not a money market security because it is not issued for a short period of time and it is a longer term generation of capital source and it does not have to be redeemed.

Common equity is also not a good choice for short term investment because it will be having a whole lot of volatility in the short-term and market may react news based in the short term,but in the long term,fundamentals will prevail and the company are valued according to the fundamentals and one has to make a higher rate of return on the equity is based upon fundamental then you should be trying to invest for the longer period of time rather than shorter period of time.