provide a description of the following investment options and elaborate on the risk factor of each:
1. fixed deposit
2. RSA retail savings bonds
3. debentures
Answers
Answer:
In the different types of investments of fixed deposits, RSA retail savings bond and debentures all possess some risk factors.
Explanation:
In the case of fixed deposits, money is given into a fixed account for a certain period of time which cannot be taken out. The biggest risk in this type of investment is that of problems with the interest rate. Because the money deposited is in a way locked up for a long time and in return you get less interest.
In the case of RSA retail bonds there is the main risk of inflation rate. In this earning there is to be a fixed interest provided on an investment during a specific term. For those investors who take out monthly earnings, for them the risk of inflation matters. The purchasing power of investors tend to get affected negatively.
Lastly, in the case of debentures, there is a risk of interest rate. Furthermore, problems like liquidity and credit default risks also exist in this long term investment.