Which is an example of a high-risk investment?

Option (a) is correct. Stock in a start-up company is an example of high-risk investments.

Further explanation:

High-risk investment:

The high-risk investment refers to the investment where the chances of capital loss are very high. The high-risk investment tends to provide a high rate of return on the cost of a high level of risk. The investment in the penny stock is an example of high-risk investment.  

Justification for the correct and incorrect option:

a.

Stock in a start-up company: This is the correct option because the start-up company is highly risky as it does not have an established formation and tends to lose the capital easily.

b.

Bond: This is an incorrect option because the bond is the loan and the bond has the preferential right to receive the payment of the interest and capital.

c.

CDs from an insured bank: This is an incorrect option because the security is backed up by the insured bank.

d.

401(k): This is an incorrect option because it is a retirement plan.

Thus, option (a) is correct. Stock in a start-up company is an example of high-risk investments.

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Answer details:

Grade: Senior School

Subject: Business studies

Chapter: Investments

Keywords: high-level risk, bond, stock, shares, 401(k), capital protection, CDs, insured bank.