CSC2 Leak Questions

For a young couple planning to buy a house in the near future, the primary investment consideration is safety and liquidity. Government Treasury bills (T-bills) are most suitable for the following reasons:

Safety :

T-bills are backed by the government and are considered virtually risk-free investments. For individuals seeking to preserve capital for a short-term goal like a home down payment, this feature is critical.

Liquidity :

T-bills are highly liquid instruments, allowing the couple to access their funds quickly if needed. They trade in active secondary markets, ensuring that they can sell their holdings with minimal price impact.

Short-Term Nature :

T-bills have maturities ranging from a few days to a year, making them ideal for short-term investment horizons like a pending house purchase.

Avoiding Risk :

Investments like corporate bonds, bank stocks, or balanced portfolios carry higher risk due to potential market volatility or credit issues, which are unsuitable for a short-term goal.

References to Study Documents :

Volume 1, Chapter 6, " Fixed-Income Securities: Features and Types, " details the safety and liquidity of Treasury bills​.

Volume 2, Chapter 16, " The Portfolio Management Process, " emphasizes aligning investment objectives with time horizons and risk tolerance​.