Section C (4 Mark)Read the senario and answer to the question.

Question

Section C (4 Mark)Read the senario and answer to the question.If Mrs. Deepika, a conservative investor, has Rs. 50, lakhs today that she could invest for the next three months in a three month bank CD or in a stock .The bank CD offers a guaranteed return 6 % over the three-month period. Alternatively she thinks the price of the stock will rise by 5% over the next months. She is confused in taking the decision. Guide her in trade off between return and risk so that she makes a decision in choosing investments?

Accepted Answer

B. The future price of the stock is uncertain, her return from investing in this stock is also uncertain. The return could be less than 5% and might be even negative. But in Bank CD return is guaranteed. So as a conservative investor she should decide of invest in the Bank CD.

Answer

A. As the return on stock is higher in next 3 months she should decide to invest in stock.

Answer

C. For making a balance trade off between return and risk she should invest 50% in each investment

Answer

D. Option B and C

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AAFM Chartered Wealth Manager CWM_LEVEL_2 Question # 266 Topic 29 Discussion

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