Question

Choose three of the investment alternatives presented in this chapter, then rank them from high to low on the factors of safetyrisk and liquidityUse 3 as the highest score and 1 as the lowest score for each factor On the basis of your ranking, which of the three alternatives would you choose for your own investment program?

Answer 1

When ranking investment alternatives based on safety-risk and liquidity, bank accounts receive a score of 1, bonds receive a score of 2, and stocks receive a score of 3. Based on this ranking, stocks would be the recommended choice for an investment program.

Step-by-step explanation:

When ranking investment alternatives based on safety-risk and liquidity, it is important to consider the characteristics of each option.

Bank accounts have very low risk and low returns, so they would receive a score of 1 for safety-risk and liquidity. Bonds have higher risk than bank accounts but offer higher returns, so they might receive a score of 2 for safety-risk and liquidity. Stocks are the riskiest option but have the potential for higher returns, so they could receive a score of 3 for safety-risk and liquidity.

Based on this ranking, the option with the highest score for both safety-risk and liquidity is stocks. Therefore, stocks would be the recommended investment choice for an investment program.