Homework Sourse1 what are the three major risks to household savers from di
1- what are the three major risks to household savers from direct security purchases?
1- what are the three major risks to household savers from direct security purchases?
Solution
The household savers have following risks in direct security purchases:
1.
Information cost or Monitoring cost: The considerable time and cost is required to monitor the investment and such efforts are not easy by common householder and in such cases, householder would leave the investment unmonitored and that can be risky.
2.
Liquidity risk: The liquidity cost may be higher than the expected when it comes to liquidate the investment in provided security hence, also householder prefer to hold cash.
3.
Price risk: The risk of price while selling the security may be lower than cost of price of the security would leave householders exposed to price risk of the security.
