AnswersHSA 26-27 EconomicsInvestment Strategies

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William is not generally a risk-taker, but he knows he may need to step out of his comfort zone to make enough money for retirement.Which investment option would best meet William’s needs?

A
a US savings bond
B
a savings account
C
a commodity
D
a certificate of deposit
2
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A
rates
B
returns
C
risks
D
rewards
3

Who regulates markets where investments are traded?

A
individual investors
B
the federal government
C
corporate entities
D
financial institutions
4

The graphic shows a sample 401k investment.

Question illustration
A
It encourages employees to contribute by offering an employer bonus.
B
It ensures that employees who contribute will retire with more money.
C
It guarantees employees a return on their investment because of a company match.
D
It incentivizes employees to contribute by offering an employer match.
5

People who make money investing in the stock market

A
get certain tax breaks.
B
should sell quickly to avoid taxes.
C
have to pay a fee to keep a stock.
D
must pay taxes on profits.
6

Tina has $1,000 per year she can invest to save money for her future.Which option would allow the highest growth for Tina's investment?

A
Tina can start investing the whole amount this year at 5% interest.
B
Tina can start investing the whole amount this year at 7% interest.
C
Tina can start investing half of the amount two years from now at 5% interest.
D
Tina can start investing half of the amount two years from now at 7% interest.
7

Which are common mistakes people make when investing? Choose four answers.They put all of their money into one kind of investment at a time. They divide their funds between more risky and less risky options.They analyze their comfort level with the types of risk they will take. They invest more money than they can afford.They focus heavily on familiar investment opportunities. They hold onto investments longer than they should to recoup losses.

A
They put all of their money into one kind of investment at a time.
B
They divide their funds between more risky and less risky options.
C
They analyze their comfort level with the types of risk they will take.
D
They invest more money than they can afford.
E
They focus heavily on familiar investment opportunities.
F
They hold onto investments longer than they should to recoup losses.
8

Ida is 25 years old and invests a one-time lump sum of $10,000 in her company's 401(k), which earns an average annual return of 6% compounded annually.Using the Rule of 72, about how many years will it take for Ida's investment to double?

A
2 years
B
6 years
C
10 years
D
12 years
9

A couple has decided to increase their income from investments for when they retire in twenty years. Which is the best way they can accomplish that goal?

A
by enrolling in a 401k and investing in the stock market
B
by opening a savings account and investing in commodities
C
by buying CDs and US government bonds
D
by opening an IRA and investing in a new business
10

Which of these are considered both short- and long-term investments? Select four options.CDsstockssavings accountsmutual fundsbondscommodities

A
CDs
B
stocks
C
savings accounts
D
mutual funds
E
bonds
F
commodities
11

How is a 401k different from an individual retirement account (IRA)?

A
A 401k is a good long-term investment strategy.
B
A 401k allows people to contribute before taxes.
C
A 401k is created by an individual who deposits money.
D
A 401k is created by an employer who may match contributions.
12

Which investor is making a common error?

A
an employee of a popular hardware store who invests only in that company’s stock
B
an employee of a popular software company who invests in many similar companies
C
someone who sells the slumping stock while they are still able to make a profit based on what they paid
D
someone who buys stock in both domestic and more risky international companies
13

Which is a commodity someone might invest in?

A
a mutual fund
B
natural resources
C
government bonds
D
a certificate of deposit
14

Which statements are true regarding a traditional individual retirement account? Choose three answers.

A
Employers create them and match employee contributions.
B
People can contribute to the account until retirement age.
C
People can withdraw money penalty-free at any time.
D
Contributions to the account are limited each year.
E
Contributions reduce taxable income.
15

Which investment has the least liquidity?

A
property
B
stocks
C
a savings account
D
a 401k
16

diversifiedsunklostwasteful

A
diversified
B
sunk
C
lost
D
wasteful

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