Investment Options Pros Cons Savings account cash savings allow for…

Question Answered step-by-step Investment Options Pros Cons Savings account cash savings allow for… Investment Options Pros ConsSavings account• cash savings allow for easy access should you need to money• very low risk if the bank is insured by the FDIC • very low interest rates• typically lower than inflation so the money loses value over timeCertificate of Deposit• higher interest rates than a typical savings account• Can be purchased for different amounts and time frames• very low risk if the bank is insured by the FDIC • money is locked in the account for a specified amount of time and may incur penalties for early withdrawal,• interest rates are locked in for the duration of the CD and cannot be changed even if market rates increaseIRA • higher rates than traditional savings accounts• very low risk if the bank is insured by the FDIC• contributions may be tax deductible (traditional IRA) or withdrawals are tax exempt (Roth IRA) • money is locked in account until recipient reaches a specific ageGovernment Treasury Bond • low risk investment• can be traded for cash value prior to maturity• low required initial investment • low rate of return, interest rates are locked in once purchased even if market rates change• this can lower the market value if the bond is traded before maturityMutual Fund • allows for diversification of assets and risk/return• management by professional• greater liquidity as a fund than as some individual investments• dividend reinvestment options • typically requires a minimum level of investment• management fees• no control over the portfolio• market value risk (value of the portfolio can decrease)Stock • Possibility of seeing large increases on investment in a short time frame• High liquidity allowing for selling or buying stocks• Flexibility for investors• Tax free until stocks are sold• Potential to earn dividends from investment • Stocks can incur great risks and investors can lose large amounts of money• Fluctuations in value, stock prices can fluctuate daily • Individual stock investment can be expensive (a single share of Berkshire Hathaway is $253,500; Amazon stock trades for $2,409.78) Each of the investors below has been given $5,000. None needs to use the money right now so they each decide to invest it. What type of investment should each choose?1. Josiah, a 16 year old high school student, plans to use the $5,000 for a car down payment in two years. He would like to earn a good rate of return but needs to access his money exactly in two years. He prefers something with a lower risk as well. What is the best type of investment for Josiah? _______________ Why?   Political Science Social Science Government ECON 317 Share QuestionEmailCopy link Comments (0)