Question

1. Historically, the average rate of return for stocks has been ____________________ compared to bonds. This is (at least in part) because stocks are ___________________.

2. The creation of a new security by combining otherwise separate loan agreements is called ________________________.

3. The price of loanable funds is called the ____________________________.

Answer 1

1.Historically, the average rate of return for stocks has been returned an average of 10% per year when compared to bonds.This is because stocks are less variable and tend to earn more ( in long term) than that of bonds.

2.The creation of a new security by combining otherwise separate loan agreements is called as Securitization. Inthe Securitization process, a company combines its different financial assets/debts to form a consolidated financial instrument. It is a very effective tool for the investors to earn returns.

3.The price of loanable funds is called as the interest rate. The interest rate is described as the cost of demanding or borrowing loanable funds in the loanable funds market.