Question

Which statement best describes the relative risk of two types of investment?
A. Savings accounts are riskier than certificates of deposit
B. Mutual funds are riskier than individual retirement accounts.
c. Bonds are riskier than stocks.
D. Certificates of deposit are riskier than hedge funds.

Answer 1

Answer: B. Mutual funds are riskier than individual retirement accounts.

Explanation:

A.P.E.X

Answer 2

Direct mutual fund investing might be a good strategy to save for retirement. Because their money is distributed among dozens or hundreds of companies, a sharp loss or even failure of a single company has far less influence on investors who are solely exposed to it as part of a mutual fund.

So, Option B is the correct relative risk for the following answer.

The other options are incorrect as:

• Option A is incorrect as, In some ways, CDs are safer than savings accounts because early withdrawal penalties apply, you may be less likely to use funds from your CD for anything other than its intended purpose at the end of your fixed term.

• Option C is incorrect as Bonds are often considered to be less hazardous than stocks for several reasons Stocks may pay dividends, but their issuer is under no obligation to do so.

• Option D is incorrect as A hedge fund is a collective investment fund that trades in fairly liquid assets and can use more complex trading, portfolio construction, and risk management techniques, such as speculative trading, leverage, and derivatives, to boost productivity.

Thus Option B is the correct relative risk for the following question.

For more information about relative risk refer to the link:

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