Question

1. Consider the 3 financial assets: money, stocks and bonds.

Explain their relative risks and returns, then assume you have $12,000 to invest. You must put at least $1,000 in each. Tell us what kind of person you are (risk-taker; don't like risk etc.) Then, distribute the $12,000 among the three financial assets with some explanation.

2. Explain why banking is an inherently unstable process. Is there a way you can think of to alter the banking process that would make it less unstable? What if banks could only lend money to financial secure individuals or companies? Would that make banking more stable?

3. Please go to the following website. http://www.federalreserve.gov/

a. explain the basic structure of the Federal Reserve and

b. let us know something you did not know about the Federal Reserve.

Answer 1

Answer-1 Money is most safe investment but its value will decrease with because of inflation, bonds are little bit unsafe than money but safer than stock and may have around 10% gain per year, it have 99% change chance that you will get you bonds price money. Among these three, stock are least safe but have highest return if got lucky you may gain 30%-300% in a year, it safety depend on stock to stock, If you are risk loving person than fist you will invest 1000 in each assets as it's a requirement, and then rest of money (7000) you should invest in stock. If you don't like risk than fist you will invest 1000 in each assets as it's a requirement, rest of money (7000) you should invest in bonds, because stock are risky and money investment have depreciation Answer-2 Bank become unstable because of its non-performing assets (NPA). NPA are that money which is lend to some company or individual, who are not able to pay its EMI. Bank can reduce NPA by given loan to little bit safer company or individual. All new technology development need huge amount of money/load and these are very risky that it may not give any returns. If bank will lend loan only to secure company or individual than they will invest money in already developed and high demand assets or business. No company will do risk research works, in results there will be not innovation or technological development If you have any doubt mention it in the comment. please click like. If you satisfied with answer.thank you