Question

List the following stocks and bonds in order from lowest default risk to highest default risk.

A. foreign government bond, common stock, preferred stock

B. foreign government bond, preferred stock, common stock

C. common stock, preferred stock, foreign government bond

D. preferred stock, common stock, foreign government bond

Answer 1

The list of the stocks and bond in order from the lowest default risk to the highest default risk is as follows:

Foreign government bond, preferred stock, common stock.

Government bonds are generally referred to as a low risk investment as they have a very low chance of default.

Preferred shared holders are considered first in the disbursement of dividend before common stockholder are considered. Thus, preferred stock is of less risk than common stock.