SIE Exam Question 169: Answer and Explanation

Question: 169

Which of the following investments would be most appropriate for an investor with an objective of capital preservation?

• A. Preferred stock
• B. Certificate of deposit
• C. Municipal bond
• D. Corporate bond

Correct Answer: B

Explanation:

A certificate of deposit would be the most appropriate investment for an investor with an objective of capital preservation. Preferred stock can lose value just like common stock, so it wouldn't be a good investment for someone who wants to retain the value of the security. Bonds would not be the best way to preserve an investment because the value of bonds, both municipal and corporate, are directly tied to interest rates, which can rise or fall depending on economic circumstances.