Answer:
To minimize risk, investors should diversify there Portfolio
Interest that builds on the principal and the interest already gained is Compound interest
Money invested in a CD is more liquid than money used to purchase a home
Explanation:
Portfolio diversification is a technique used by investors to reduce the risk associated with their investment portfolio by ensuring they spread the money for their investment in asset of different class and of different risk.
Portfolio diversification means ensuring investment is on assets that have negative correlation, i.e. assets that do not move in the same direction in terms of returns.
Compound Interest is when interest for the first period of an investment is calculated and added to the principal before computing the interest for the next period, and so on.
A CD which is a abbreviation for Certificate of Deposit is a financial instrument issued by banks and other financial institutions to customers who want to invest their money and earn interest income. Money invested in a CD is always for a fixed period of time till maturity.
Money invested in real Estate take a longer time to realize than the money invested in CD,
The money invested in CD is more liquid than the money used to purchase a home.
Risks and returns go hand in hand. There exists a direct relationship between the risk and returns in the investment terms, where the returns garnered are proportionate to the risks involved in such investments.
The correct statements for the risks and returns are as below,
The golden rule of risks and returns that shows the relationship between these two factors is that the higher the returns, the higher is the risk involved in such investment. Diversifying the portfolio also diversifies the risks associated with them.
A compounded interest is basically a type of interest that keeps getting accumulated over the principal amount plus the interest already accumulated over such a deposit.
Money invested in a current deposit is safer than money invested in stocks and equities as the current deposit gives a fixed predetermined return, whereas, the equities are volatile.
Renting a home is computed effectively cheaper than purchasing a home as the costs associated with home loans are effectively higher than the rental costs of a home over a longer period of time.
Hence, the correct statements that match the risk and return profiles of financial aspects are as aforementioned.
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