Yr 11 Economics

Topics: Investment, Finance, Risk Pages: 2 (370 words) Published: May 15, 2005
Year 11 Economics- Homerwork Task 6

Part A

TypeRisk Expected Return(%) PAAmount ($)% of total investment ING Savings MaximiserLow5.40%$7500035%

Commonwealth Cash investment accountLow5.25%$5000025%
Westpac Moderate Growth FundMedium4.17%$5000025%
Colonial First Estate Conservative FundLow 1.7%$2500015%

The portfolio shown in the table above I feel is ideal for Hugh Jackman. He wishes to invest $200,00 and does not want to risk losing any of his money.
Therefore I have chosen to invest the money all in banks with good rates of interest these being 5.40, 5.25, 4.17 and 1.7. These have been chosen as they are very low risk but also will provide more money as they have good interest levels. These accounts have been specifically chosen to suit Hugh Jackman's needs. The main reason in which I decided to invest the money in banks is the fact that Hugh is scared of the volatile economy, therefore banks are the safest options rather than investing in a stock trading company where prices are likely to plummet or rise on a regular basis, whereas banks are very steady. The risks are not very high but due to this the potential gains will not be very high, although gains will occur due to the high levels of interest in the chosen accounts. Part B

Part C

i)If interest rates reduce it will not be good for your account, as you will be earning less interest on the existing money in your account. Also share prices are likely to go up as the price of borrowing is higher therefore less people will be spending money as they will have to pay more of it back ii)If inflation increases the only way in which increased spending can be reduced is by a rise in interest rates, which will be good for Hugh's account. iii)If the worlds economy is weak it definitely minimized the options which will give you a good return. As if companies aren't making enough money they will not be expanding and will not be looking for people to invest in their company.
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