The following is an example of alternative investment.a. Investment in AAA listed bondb. Investment in Government securitiesc. Purchase of commercial real estated. Investment in Exchange traded futures
Question
The following is an example of alternative investment.a. Investment in AAA listed bondb. Investment in Government securitiesc. Purchase of commercial real estated. Investment in Exchange traded futures
Solution
The example of an alternative investment from the options provided is c. Purchase of commercial real estate.
Here's why:
a. Investment in AAA listed bond: This is a traditional investment. AAA is the highest rating given to bonds by credit rating agencies, indicating the highest level of trustworthiness and lowest risk.
b. Investment in Government securities: This is also a traditional investment. Government securities are considered to be the safest form of investment as they are backed by the government itself.
c. Purchase of commercial real estate: This is an alternative investment. Alternative investments include all investments that are not stocks, bonds, cash, or real estate. They are called 'alternative' because they deviate from traditional investment paths. Commercial real estate falls under this category as it involves investing in property that is used solely for business purposes.
d. Investment in Exchange traded futures: This is a traditional investment. Exchange traded futures are standardized contracts to buy or sell a particular asset at a predetermined price at a specific time in the future. They are traded on a regulated exchange and are used by investors to speculate on the price movement of the underlying asset.
Similar Questions
Alternative investment is defined as a _________ that does not fall into one of theconventional investment categories.a. mutual fundb. financial assetc. personal propertyd. financial planning
Alternative investments are investments other than ownership of traditional asset classes (public equity and fixed-income instruments and cash) and include private capital, real assets, and hedge funds.
What are some examples of alternate investments?Question 2AnswerA.Hedge fundsB.Savings accountsC.Treasury bondsD.Corporate stocks
Alternative Investments:
Alternative Investments are grouped together not because they have similar features but instead because they have characteristics distinct from traditional investments. Investing in alternatives can be done through fund investing, co-investing, or direct investing. Alternative investments typically offer investors greater diversification and higher expected returns than traditional investments but often involve longer-term, illiquid investments in less efficient markets. Investing in alternatives requires specialized knowledge. Alternative investments typically rely on more complex and richer compensation structures than traditional investments in order to better align manager and investor incentives over longer periods.
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