AnswersHSA 26-27 EconomicsInvestment Strategies

Investment Strategies Answers

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1
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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
2
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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
3

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
4

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.
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

diversifiedsunklostwasteful

A
diversified
B
sunk
C
lost
D
wasteful
7

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.
8

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.
9

The images show what happened to two people who invested $1,000. Which investment advice would Gale most likely give to Alex?

Question illustration
A
Invest in stocks because they are less risky.
B
Put most of your money in a savings account instead.
C
Spread your investments in several different areas.
D
Stick with the stocks because they will bounce back.
10

Which investment has the least liquidity?

A
property
B
stocks
C
a savings account
D
a 401k
11

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
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

[BLANK]

A
diversified
B
sunk
C
lost
D
wasteful
14

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

A
CDs
B
stocks
C
savings accounts
D
mutual funds
E
bonds
F
commodities
15

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
16

Who regulates markets where investments are traded?

A
individual investors
B
the federal government
C
corporate entities
D
financial institutions
17

The graph shows examples of investments with high and low liquidity.

Question illustration
A
knows they will need cash in the near future.
B
knows they will need cash years from now.
C
wants to have a guaranteed source of income.
D
wants to have higher returns on their investment.
18

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
19

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.

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