Multiple Choice
Which of the following is NOT an example of a business’s efforts to contribute to society?
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1. Introduction to Accounting
Types of Accounting
Struggling with Financial Accounting?
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Which of the following financial products typically has the most predictable income?
A
Common stocks
B
Real estate investment trusts (REITs)
C
Fixed-rate government bonds
D
Mutual funds
Verified step by step guidance1
Understand the nature of each financial product listed in the problem: Common stocks, Real estate investment trusts (REITs), Fixed-rate government bonds, and Mutual funds.
Analyze the income predictability of each product: Common stocks often have variable dividends based on company performance, REITs distribute income from real estate investments which can fluctuate, Fixed-rate government bonds provide a consistent interest payment, and Mutual funds depend on the performance of the underlying assets.
Focus on Fixed-rate government bonds: These bonds are issued by governments and pay a fixed interest rate over their term, making their income highly predictable compared to other products.
Compare Fixed-rate government bonds to the other options: Highlight that the income from stocks, REITs, and mutual funds can vary due to market conditions, while government bonds offer stability and certainty in income.
Conclude that Fixed-rate government bonds typically have the most predictable income due to their fixed interest payments and government backing, which minimizes risk.
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