Choosing the Right Savings and Investment Options:
Tutorial Exam 2023 with complete solution
Evaluate the following investment options by comparing their risk and liquidity:
buying a franchise
real estate (buying property)
mutual fund
Which of the three investment alternatives is the best for you? Explain the reasons for
your choice.
(Answers may vary.)Buying a franchise: For me, this is the riskiest investment, because
the success of the business depends on the product or service it sells. If there is no
demand for the product or service, the business will go under. This investment is also
highly illiquid—in addition, finding someone willing to buy a business is difficult.
Mutual fund: This is the least risky of the three investment options. It is highly liquid
compared to buying a franchise or real estate. Mutual fund investors can easily cash in
their investments by selling the units they hold in a fund at the current market price.
Real estate: Real estate is a risky investment. First, property prices can fall in a
depressed housing market. Second, real estate properties are illiquid. They can't be
sold quickly for a good price, especially in times of recession in the housing market or in
the overall economy.
A mutual fund is the best of the three investment options for me, for the following
reasons:
I can invest small amounts of money regularly and get higher returns on the investment
than I would from a savings account. Also, this is a highly liquid investment. In case of a
financial emergency, I can quickly sell my mutual fund units at their current market
price.
Real estate is currently both a risky and illiquid investment, because of poor market
conditions.
Buying a franchise is not a good option for me, because I don't plan to go into business.
In any case, I don't have the money to make this investment.
Put the following investment options in order of least to greatest risk:
starting a business
B-rated bond
speculative stock
property
B-rated bond
property
starting a business
speculative stock
What are two reasons to save instead of invest?
safety
liquidity
profit
retirement
insurance
Tutorial Exam 2023 with complete solution
Evaluate the following investment options by comparing their risk and liquidity:
buying a franchise
real estate (buying property)
mutual fund
Which of the three investment alternatives is the best for you? Explain the reasons for
your choice.
(Answers may vary.)Buying a franchise: For me, this is the riskiest investment, because
the success of the business depends on the product or service it sells. If there is no
demand for the product or service, the business will go under. This investment is also
highly illiquid—in addition, finding someone willing to buy a business is difficult.
Mutual fund: This is the least risky of the three investment options. It is highly liquid
compared to buying a franchise or real estate. Mutual fund investors can easily cash in
their investments by selling the units they hold in a fund at the current market price.
Real estate: Real estate is a risky investment. First, property prices can fall in a
depressed housing market. Second, real estate properties are illiquid. They can't be
sold quickly for a good price, especially in times of recession in the housing market or in
the overall economy.
A mutual fund is the best of the three investment options for me, for the following
reasons:
I can invest small amounts of money regularly and get higher returns on the investment
than I would from a savings account. Also, this is a highly liquid investment. In case of a
financial emergency, I can quickly sell my mutual fund units at their current market
price.
Real estate is currently both a risky and illiquid investment, because of poor market
conditions.
Buying a franchise is not a good option for me, because I don't plan to go into business.
In any case, I don't have the money to make this investment.
Put the following investment options in order of least to greatest risk:
starting a business
B-rated bond
speculative stock
property
B-rated bond
property
starting a business
speculative stock
What are two reasons to save instead of invest?
safety
liquidity
profit
retirement
insurance
