Final answer:
The best investment strategy for the client, who is risk-averse and requires the funds in a year, is to go for a high interest savings account or short-term government bonds. These options protect the principal while providing some interest, suitable for her short-term and low-risk requirements.
Step-by-step explanation:
The client needs an investment strategy that guarantees the preservation of the principal with a low-risk profile, considering that she will need the money in one year to help finance the purchase of a cottage. Given her risk-averse nature and short investment horizon, a high interest savings account or short-term government bonds might be the best options. These forms of investments provide protection of the principal while still offering some interest, aligning well with the client's objectives of having no erosion of the initial $50,000 investment. However, it's important to note that while these options are low-risk, they may offer lower returns compared to other investment opportunities like stocks, which generally have a higher average return over time but also come with increased risk.
Stocks, for example, have a higher long-term return potential but are not suitable for the client's short-term goal due to their volatility. Bonds offer moderate returns and are generally more stable than stocks, making them suitable for investors with a conservative risk appetite. For ultimate safety, federally insured savings accounts offer the least risk, but also the lowest returns; still, they are appropriate for the client's needs.