Multiple Choice
Which of the following is generally considered the best way to achieve long-term financial goals?
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7. Receivables and Investments
Introduction to Investments in Securities
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Which of the following is an example of a high-risk investment?
A
Certificate of deposit (CD)
B
Savings account
C
Common stock in a start-up technology company
D
U.S. Treasury bonds
Verified step by step guidance1
Understand the concept of investment risk: High-risk investments are those with a greater chance of losing value but also potentially higher returns. Low-risk investments are more stable and predictable.
Analyze each option: Certificate of deposit (CD) and savings accounts are considered low-risk because they are insured and offer fixed returns. U.S. Treasury bonds are also low-risk as they are backed by the government.
Evaluate the characteristics of common stock in a start-up technology company: Start-ups are inherently risky due to their unproven business models and uncertain future performance. Investing in their stock carries a high risk of loss but also the potential for significant returns if the company succeeds.
Compare the risk levels: Among the options provided, common stock in a start-up technology company is the highest-risk investment due to its volatility and uncertainty.
Conclude that the correct answer is common stock in a start-up technology company, as it aligns with the definition of a high-risk investment.
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