The idea that investors on average have earned a higher return from common stocks than from Treasury bills supports the view that:
A) investors are irrational.
B) there is a relationship between risk and return.
C) real rates of return will be lower during periods of price stability.
D) stocks should be avoided when inflation is low.

Question

Quizplus · Accepted Answer

The higher return from common stocks compared to Treasury bills indicates that investors are demanding a higher return for taking on the higher risk associated with stocks. This supports the view that there is a relationship between risk and return, where investors expect to be compensated for taking on greater risk.

The Idea That Investors on Average Have Earned a Higher