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Questions and Answers
Which asset class has the highest risk level?
What is the risk level associated with cash investments?
What type of investment is described as interest-bearing securities issued to borrow money?
Bonds
Property investments are considered low risk.
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What are the two primary reasons individuals purchase shares?
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What can a mortgage bond help investors acquire?
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Study Notes
Cash
- Cash investments are similar to bank deposits or money market accounts.
- Investors earn regular income through interest payments
- Cash represents the lowest risk investment.
Property
- Property is often the largest asset in a person's investment portfolio.
- Property values tend to keep pace with inflation.
- Mortgages can help investors purchase property they otherwise could not afford.
- Risks include location, political instability, and lack of liquidity.
Bonds
- Bonds are interest-bearing securities issued by governments or companies to borrow money.
- Bonds are essentially IOUs, promising to repay borrowed money with interest by a specific date.
- Bonds carry moderate risk.
Equity
- Equity represents ownership in a company.
- Businesses sell shares to raise capital.
- Investors purchase shares for two primary reasons:
- Capital Growth: Share values increase as the business grows.
- Dividends: A portion of company profits is distributed to shareholders, at the discretion of the company directors.
- Equity represents a high risk investment as there are no guarantees of profit.
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Description
Test your knowledge about different types of investments including cash, property, bonds, and equity. Explore the risks and benefits associated with each investment type. This quiz is perfect for anyone looking to understand financial fundamentals.
