Question

Order the investment assets from least risky to most risky:

1. Corporate bond with maturity of 10-years issued by Apple

2. 3-month T-bill
3. Apple preferred stock  

4. US government bond with maturity of 10-years
5. Apple Stock

Answer 1

Answer: 2, 4, 1, 3, 5

The above order is set on least risky to highest risky way.

T-bill: This is the safest investment, since it is issued by the Federal government with a promissory note of paying on maturity.

Government bond: This is the 2^nd safest, since it is backed by the national government.

Corporate bond: This is the 3^rd safest, since the company must have obligation of paying such debt on liquidation before paying preference shareholders and equity shareholders.

Preferred stock: This is the 4^th safest, since on liquidation this will be paid earlier than equity stockholders.

Stock: This is the least-safe investment, because stockholders are the owners of a company and carry immense uncertainties.