The Role of CashDeposits

Question 1

What are the key reasons for holding a cash deposit?

Answer 1

1. Liquidity

2. Security

Question 2

Explain why you would hold a cash deposit?

Answer 2

Ease and speed of an investment being turned to cash.
It can be used as a savings vehicle.
Provides interest return.

Question 3

Are Instant accounts highly liquid or less liquid

Answer 3

Highly liquid

Question 4

Should investors invest in less liquid investments before planning cash deposits?

Answer 4

No - most investors need cash at short notice and should plan cash deposits before less liquid investing,

Question 5

Do Capital Deposits have high or low levels of security?

Answer 5

High levels of security.

Question 6

What else can cash deposits be used for?

Answer 6

Savings vehicle for larger purchases.

Question 7

Will capital be lost by investing in a cash deposit?

Answer 7

No -capital is unlikely to be lost but will be eroded by inflation.

Question 8

What reward do cash deposits provide?

Answer 8

Reward of interest.

Question 9

How do you define a real rate of inflation?

Answer 9

Interest may be greater than inflation providing a real rate of return.