The main idea is that financial intermediaries collect surplus funds from savers and lend them out at a margin to different types of borrowers. In Ireland, these borrowers include individuals (for mortgages and personal loans), businesses (for investment and working capital), and the Government (to fund public spending through debt). The margin comes from the difference between the interest paid to savers and the interest earned on loans and securities, which lets providers earn a return while facilitating funding across the economy. Because savers’ funds are channeled to all three groups, the correct answer includes individuals, businesses, and the Government.

Traditional investment asset classes are broad categories of investable assets with distinct risk and return profiles used as core building blocks in portfolios. The two classic traditional asset classes are equities (ownership in companies, with potential for capital growth and dividends) and bonds (debt instruments, providing income and generally lower risk than equities). Gold, while a widely used investment and a common diversification tool, is a commodity rather than a traditional core asset class. It doesn’t generate income in the way bonds do and its price behavior isn’t driven by the same cash-flow dynamics as equities. So the pair that fits the traditional framework is bonds and equities.

Liquidity is about how easily an asset can be bought or sold in the market without causing a significant price change. The risk in question focuses on selling quickly and at a fair price, which is exactly what liquidity risk captures. When an asset is highly liquid, you can enter or exit positions with little price impact; when it’s illiquid, selling rapidly may require accepting a much lower price or waiting a long time for a buyer. Inflation risk relates to the eroding value of money over time, not to how easily an asset can be sold. Credit risk deals with the possibility that a borrower defaults. Market risk involves broad price movements due to overall market factors, not the ease of selling. So the term that best describes the ability to sell an asset without affecting its price is liquidity risk.

Total return on equities combines the income you receive from dividends with the gain from rising stock price. Here, the dividend yield is 3% and the expected capital growth is 2%, so you add them: 3% + 2% = 5%. The risk-free rate of 2% isn’t part of this calculation; it serves as a baseline for comparing risk, not a component of the equity’s total return. So the total expected return is 5%.