Question

  Compare the risks associated with investments in

a. Corporate bonds

b. Government Bonds

c. Common Stock

d. Preferred Stock

e. Derivative

f. Currency

Answer 1

Ans:- a) Corporate bond:- Corporate bond is a high risk investment. It's interest rate is constantly higher than government bond. Utmost all corporate bonds are debentures( not protected by security).

b) Government bond:- Government bonds are generally a less risk investment because probability of loan payment is low. It is low interest rate and lower risk. So it is one of the safest Investment.

c) Common stock:- Common stock is usually high risk investment because it is unstable. Common stock signify the ownership in a company. Common stock holders have the right to elect company directors.

d) Preferred stock:- Preferred stock is considered as a good investment for persons seeking for solid income. So preferred stock is often better than common stock. Corporations generally issue preferred stock.

e) Derivative:- Derivative investments is good investment and low risk investment if it is use properly(use in the direction of investors favour).Not using property it is risky.

f) Currency:- Currency investment is considered a risky investment because currency depreciation badly affect the worth of investment. Companies and persons that involves in foreign markets are unprotected to currency risk.