Which type of investment fund is generally considered the most attractive from a return perspective, assuming higher risk is acceptable?

• A. Balanced funds
• B. Bond funds
• C. Money market funds
• D. Equity funds

Answer: (D)

Verified step by step guidance

1. Understand the types of investment funds listed in the problem: Balanced funds, Bond funds, Money market funds, and Equity funds.
2. Recognize that investment funds differ in their risk and return profiles. Higher risk is typically associated with higher potential returns.
3. Analyze the characteristics of each fund type: Balanced funds combine stocks and bonds for moderate risk and return; Bond funds focus on fixed-income securities with lower risk and return; Money market funds invest in short-term debt instruments with minimal risk and low return; Equity funds primarily invest in stocks, offering higher risk and potentially higher returns.
4. Identify that the problem specifies a preference for higher returns, assuming higher risk is acceptable. This aligns with the characteristics of Equity funds.
5. Conclude that Equity funds are generally considered the most attractive from a return perspective when higher risk is acceptable, as they aim to maximize returns through stock investments.