Certified Management Accountant Practice Exam 2025 - Free CMA Practice Questions and Study Guide

The option of US Treasury bonds typically has the lowest rate of return among the given financial instruments. This is because Treasury bonds are considered one of the safest investments available, as they are backed by the full faith and credit of the U.S. government. Investors are generally willing to accept a lower return in exchange for the security and stability that these bonds offer, making them a preferred choice for risk-averse investors.

In contrast, common stock often provides higher potential returns due to the risk associated with equity investments, which can fluctuate significantly based on the performance of the underlying company. Convertible preferred stock can also offer a higher yield than Treasury bonds, since it provides fixed dividends that can be converted into common stock, capturing the potential for growth. Subordinated debentures carry higher risk than Treasury bonds and typically offer higher interest rates to compensate investors for taking on that additional risk.

Therefore, US Treasury bonds are characterized by their lower returns due to their inherent safety and stability in the investment landscape.