Q. Consider the following statements:

1. Stocks offer higher average returns than bonds and other fixed-income investments, but with correspondingly higher volatility and risk.
2. Stock prices are primarily governed by supply and demand, with earnings being the most important influencing factor.

Which of the above statements is/are correct?
Answer: Both 1 and 2
Notes: Both statements are correct. Historically, stocks have yielded higher average returns than bonds, but with greater short-term volatility and risk. Stock prices move according to supply and demand dynamics, but corporate earnings are widely recognized as the most significant fundamental factor driving these price changes and influencing investor sentiment and market pricing.