Question

Which of the following is the most diversified investment?

A. owning only one company’s stock.

B. owning a mutual fund

C. owning your own business

D. putting your money under your mattress

Over the long run which investment vehicle has the most risk?

A. Municipal bonds

B. Government Securities

C. Stocks

D. Savings account

Which one of the following companies is grading system using in the United States to rate corporate bonds?

A. One Bond

B. Rater's-r-us

C. IBM

D. Moody's

Answer 1

1.Option b Owning a mutual fund is correct option because mutual fund consists of different and negatively or uncorrelated stocks there by increasing diversification and reducing unsystematic risk. Owning one stock or a single business is not diversification as inventing in only one thing doesnot diversify away industry specific risk.

2. Option c. Stocks have highest risk because Municipal bonds, government securities and saving account provide assured returns. Municipal bonds and government securities have power to tax . Hence their securities are less risky. Savings account also provides assured sum.

3. Option d . Moody's is correct option because . It is one of the three BIg 3 in rating agencies . Others are Moddy and Standard and Poor.