Question

Giselle has $10,000. She could put it in a CD earning 2% interest, a tech stock earning an 18% return this year, a mutual fund losing 3% this year, or an index fund earning an average return of 6%. If Giselle wants the investment with the lowest volatility which should she choose?



Select the best answer from the choices provided.



the CD



the tech stock



the mutual fund



the index fund

Answer 1

The investment with the lowest volatility is the CD.

CD stands for Certificate of Deposit. It is a savings certificate that states that the bearer of the certificate is entitled to receive interest. A Certificate of Deposit reflects the amount invested, specified interest rate, and its maturity date.

In Giselle's case, her CD will reflect a $10,000 with an interest rate of 2% compounded annually and a maturity date that is either one month up to five years from the day of opening the CD account and depositing the cash.

Regardless of what happens in the stock market, Giselle is assured of earning 2% from her $10,000 investment. For example: her term is 1 year.
$10,000 * 2% * 360/360 = 200 is the interest she will earn for the year.