Problem: Personal Finance
1. Which investment is more liquid: a boat or jewelry? Why?
2. Suppose that you wanted to invest in something and you did not want it to pay any regular income (you want to make all your return when you sell it). What are some investments that fit this criterion?
3. Which is riskier: a company's stock or the same company's bonds?
4. You have built up an emergency fund of two month's expenses. Right now it is just sitting in a savings account. You friend says that you should put it in CDs to earn more interest. What is wrong with his suggestion? What are some alternatives to earn a bit more interest and still fulfill your goal of having an emergency fund?
5. Which of the following would you expect to have a higher return: 2002 Honda Accord, a Glock pistol, or an entertainment center? Which one is the most liquid?
6. Anne has all of her money invested in small-company, growth stocks. She has been investing it this way since she graduated and started working 10 years ago. What are some steps that she should take as she moves towards retirement over the next 20 years? Should her new investments have more or less liquidity?
7. With a bond, what is the maximum return you can get if you hold a bond to maturity? Explain.
8. Is there a maximum return when you buy stock?