Submit AllQuestion 28 of 30<>Suppose Jon decides to purchase either a long-term Treasury bond or a share of stock from a company in the Dow JonesIndustrial Average. Assume that either one will behave similarly to the average security in their class, and ignore the effect ofmarket conditions.Which security is more likely to lose most of its value in the next year after Jon purchases it?O the probabilities of major loss are the samethey are both guaranteed to increase in valuethe stockthe bondBased on historical returns, which security is likely to grow more significantly in value after Jon purchases it?the bond8:27 PMa46°FE 4)12/15/202 Submit Allstion 28 of 30Based on historical returns, which security is likely to grow more significantly in value after Jon purchases it?O the bondthe probabilities of substantial gain are the sameO the stockO they are both guaranteed to increase in valueGiven the answers to the questions, what advice should be given to Jon if he does not expect to sell the security for at least20 years?Flip a coin to pick which security to buy.The bond is a safer bet because there is no risk of default.Based on historical returns, the bond will likely outperform the stock over that period.Based on historical returns, the stock will likely outperform the bond over that period.46°Fへ12/1

Treasury bonds refer to securities issued by the government as a debt to generate capital revenue,…

decides to purchase either a long-term Treasury bond or a share of stock from a company in the Dow Jor erage. Assume that either one will behave similarly to the average security in their class, and ignore the ions.

decides to purchase either a long-term Treasury bond or a share of stock from a company in the Dow Jor erage. Assume that either one will behave similarly to the average security in their class, and ignore the ions.

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter9: The Financial Markets And The Economy: The Tail That Wags The Dog

Section: Chapter Questions

Problem 5TY

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Submit All
stion 28 of 30
Based on historical returns, which security is likely to grow more significantly in value after Jon purchases it?
O the bond
the probabilities of substantial gain are the same
O the stock
O they are both guaranteed to increase in value
Given the answers to the questions, what advice should be given to Jon if he does not expect to sell the security for at least
20 years?
Flip a coin to pick which security to buy.
The bond is a safer bet because there is no risk of default.
Based on historical returns, the bond will likely outperform the stock over that period.
Based on historical returns, the stock will likely outperform the bond over that period.
46°F
へ
12/1

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