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    09 Elms Quiz - Arg

    Uploaded by

    Kim Andrew Duane C. Rosales
    This document contains a matching question about investment assets and their advantages and disadvantages. It also contains two free response questions about why risk-taker and risk-averse investors would prefer different types of investments. The matching question asks to match investment assets like stocks, bank deposits, mutual funds, real estate, and insurance with advantages like short holding periods or recurring income, and disadvantages like risk of loss or fees. The free response questions ask why risk-taker investors prefer equities/stocks over fixed income due to stocks' potential for high returns, and why risk-averse investors prefer fixed income due to its predictable returns.

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    09 Elms Quiz - Arg

    Uploaded by

    Kim Andrew Duane C. Rosales
    30 views3 pages
    This document contains a matching question about investment assets and their advantages and disadvantages. It also contains two free response questions about why risk-taker and risk-averse investors would prefer different types of investments. The matching question asks to match investment assets like stocks, bank deposits, mutual funds, real estate, and insurance with advantages like short holding periods or recurring income, and disadvantages like risk of loss or fees. The free response questions ask why risk-taker investors prefer equities/stocks over fixed income due to stocks' potential for high returns, and why risk-averse investors prefer fixed income due to its predictable returns.

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    This document contains a matching question about investment assets and their advantages and disadvantages. It also contains two free response questions about why risk-taker and risk-averse investors would prefer different types of investments. The matching question asks to match investment assets like stocks, bank deposits, mutual funds, real estate, and insurance with advantages like short holding periods or recurring income, and disadvantages like risk of loss or fees. The free response questions ask why risk-taker investors prefer equities/stocks over fixed income due to stocks' potential for high returns, and why risk-averse investors prefer fixed income due to its predictable returns.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    30 views3 pages

    09 Elms Quiz - Arg

    Uploaded by

    Kim Andrew Duane C. Rosales
    This document contains a matching question about investment assets and their advantages and disadvantages. It also contains two free response questions about why risk-taker and risk-averse investors would prefer different types of investments. The matching question asks to match investment assets like stocks, bank deposits, mutual funds, real estate, and insurance with advantages like short holding periods or recurring income, and disadvantages like risk of loss or fees. The free response questions ask why risk-taker investors prefer equities/stocks over fixed income due to stocks' potential for high returns, and why risk-averse investors prefer fixed income due to its predictable returns.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    Business Finance - SY2223-1T

    Question 1
    Matching

    Match the investment asset in column A with its advantage/disadvantage in column B.

    Disadvantage: On some of the traditional plans, no sickness/death until a certain age

    may mean not getting any benefits at all   1     2     3     4     5    

    Advantage: Shorter, if any, holding period vs. bonds   1     2     3     4    

    5    

    Advantage: Can be a source of recurring rental income   1     2     3     4    

    5    
    Disadvantage: Riskiest of all assets (can lose as much as 50% of their money in one

    day)   1     2     3     4     5    

    Disadvantage: Pay management fees   1     2     3     4     5    

    1. Stocks (equity)
    2. Bank deposits (fixed income)
    3. Mutual funds
    4. Real estate
    5. Insurance

    Correct answer: Disadvantage: On some of the traditional plans, no sickness/death


    until a certain age may mean not getting any benefits at all => Real estate, Advantage:
    Shorter, if any, holding period vs. bonds => Bank deposits (fixed income),
    Advantage: Can be a source of recurring rental income => Mutual funds,
    Disadvantage: Riskiest of all assets (can lose as much as 50% of their money in one
    day) => Insurance, Disadvantage: Pay management fees => Stocks (equity)
    Question 2
    Freeform

    Why would a risk-taker type of investor prefer equities over fixed income?

    Correct answer:

    Equities are the riskiest of all assets because of their price volatility. In the Philippine
    Stocks Exchange, clients can lose as much as 50% on a stock in one day. Reasons
    why stock prices are volatile include uncertainties in company’s earnings, negative or
    positive market sentiment of investors, etc. And with these great risks comes the
    potential for great upside for the risk-taker investor.

    Question 3
    Freeform

    Why would a risk-averse type of investor prefer fixed income over equities?

    Correct answer:

    Fixed-income assets are low-risk investments. Even if potential returns are low
    relative to equities, it gives known income/periodic payments to the risk-averse
    investor. However, this is only true if the security is held until maturity. Default risk,
    which is the risk of the counterparty not fulfilling his obligation, is also present in
    fixed income assets. Therefore, an investor must carefully analyze the issuer and be
    convinced about its financial stability before buying its debt security.

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