Question

1. Personal Finance

a. In early 2015, selected automobiles had an average cost of $20,000. The average cost of those same motor vehicles is now (today) $24,000. What was the (%) rate of increase for this item between the two time periods?

b. Define the four classes of assets

Answer 1

A) Future value = Present value * (1+i)^2

=> 24000 = 20000*(1+i)^2 => 9.5445%

B) Four classes of assets:

1. Shares or shares: the shares are owned shares issued by listed companies and traded on an exchange, such as NYSE or Nasdaq. You can potentially benefit from the stock through an increase in the price of the shares or by receiving dividends. The asset class of the shares is often broken down by market capitalization with reduced capitalization, mid cap and large capitalization shares.
2. Bonds or other fixed-income investments: Fixed income investments are investments in debt securities that pay a fixed rate of return in the form of interest. Although not all fixed income investments offer a specific guaranteed return, it is generally considered that such investments are less risky than investing in stocks or other asset classes.
3. Cash and cash equivalents, such as money market funds: the main advantage of cash or equivalent investments is their liquidity. Money stored in cash or cash equivalents can be accessed quickly and easily at any time.
4. Property or other tangible assets: real estate assets and other tangible assets are considered as a class of assets offering protection against inflation. The tangible nature of these assets also means that they are considered more like a "real" activity, compared to assets that only exist in the form of financial instruments.