Question

On average, for the period 1926 through 2017: Multiple Choice the real rate of return on U.S. Treasury bills has been negative. small-company stocks have underperformed large-company stocks. long-term government bonds have produced higher returns than long-term corporate bonds. the excess return on long-term corporate bonds has exceeded the excess return on long-term government bonds. the excess return on large-company stocks has exceeded the excess return on small-company stocks.

Answer 1

Answer: The excess return on long-term corporate bonds has exceeded the excess return on long-term government bonds.

Explanation:

From the year 1926 - 2017, the excess return on long term corporate bonds has indeed exceeded the excess return on their government counterpart.

Excess return is the amount of return that a security gives over the risk free rate.

Government bonds provide returns at the risk free rate while corporate bonds have to provide at a rate higher than the risk free rate. This means that corporate bonds will therefore give more excess returns than comparative government bonds.