Personal Investment Exercises

A Lilian Garside, who is liable to basic-rate tax at 30% on her total income, has £2,400 to invest for a period of two years only. Which of the following will give her a better yield?

(a) Two-year term shares in a building society paying 0.75% over

ordinary share rate of 8.75%, tax paid.

(b) Bank deposit account on which the interest rate is 11%.

Would she get an even better yield by placing the £2,400 in an ordinary share account in a building society, and drawing out of it £100 a month which she places in a subscription share account paying 2% above ordinary share rate?

B Jack Fenton decides to save £20 a month merely to provide a liquid reserve which he might want to spend at any time. Would you advise him to place it in SAYE (index-linked), 3rd issue on the grounds that inflation is likely to continue at over 15% a year for several years, or in some other investment? Mention your reasons.

Personal Investment Test Questions

1. What benefits can be looked for from any investment?

2. What do you understand by the term 'liquidity' as applied to an investment?

3. Define the term 'money deposit'.

4. When choosing a method of depositing money what factors would you take into consideration?

5. If the next change in market levels of interest rates is likely to be up rather than down, would you choose to deposit money at a fluctuating rate of interest or a fixed one, other things being equal?

6. Is the interest earned on a building society investment tax-free?

7.... see: Personal Investment Test Questions

Refunds, Personal And Business Finance 2017

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