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assuming that investment is not held until maturity,and there is no inflation,which of the following has a risk of fluctuation in the capital value?
1.certificate of deposit
2.government stock
3.bank deposit
a)1 and 3
b)1 and 2
c)2 and 3
d)1 only
Answer B3 A bank deposit has no risk to its capital value fluctuation. You will get back the bank balance.
2 Goveenment stocks market values fluctuate its interest rates. If interest rates rise the market value falls, therefore the capital value is subject to risk.
1 If a child is held to maturity you get back the amount deposited. However, the question states ‘not held to maturity’ and the traded value of these instruments fluctuates with interest rates.
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