SIE practice questionmediumCommon Stock
Which of the following best describes common stock's risk and return profile?
- AHigher risk and higher long-term return than preferred stock✓ Correct answer
- BSame risk and same return as preferred stock
- CNo risk, guaranteed high returns
- DLower risk than preferred stock
Explanation
Why A — Higher risk and higher long-term return than preferred stock
Common stock can rise or fall more than preferred but often outperforms long-term. The other choices are not accurate.
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