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 B
3 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.