AnswersCHS EconomicsInvesting and Financial Markets

Investing Answers

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21
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The image shows Alex’s investments in one year. Investments during One Year

Question illustration
A
He should have invested in a commodity instead of a stock.
B
He would have lost more with a higher-risk investment.
C
He most likely would have benefited by diversifying.
D
He most likely would have profited by buying more of the stock.
22
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Why is it risky to invest in a commodity?

A
A commodity has little or no value as a long-term investment.
B
Commodity stocks cannot be traded after you purchase them.
C
The commodity's price might drop significantly very quickly.
D
The investment will tie up your money for more than one year.
23

How is a savings account most useful?

A
for saving for a long time without withdrawing
B
for depositing and withdrawing money frequently
C
for using money for CDs and other investments
D
for using money in the near future but not right away
24

Which is an example of a high-risk investment?

A
stock in a start-up company
B
bond
C
CDs from an insured bank
D
401(k)
25

The image shows Gale's investments during one year. Investments during One Year

Question illustration
A
If she had purchased only the stock and had not diversified her investments, she would have lost money.
B
If she had diversified her investments further, her profits would have been considerably larger.
C
If she had put money in her savings account only and had not diversified, her profits would grow.
D
If she had diversified her investments further, she would have reduced her risk but made less of a profit.
26

What is the relationship between risk and return?

A
A higher risk often means a higher return.
B
A lower risk always means a higher return.
C
A higher risk often means a lower return.
D
A lower risk will always mean a lower return.
27

In what way does a 401(k) differ from an individual retirement account (IRA)?

A
A 401(k) is created through an individual’s employer.
B
A 401(k) can be created by individuals who deposit money.
C
A 401(k) allows consumers to contribute before taxes.
D
A 401(k) is a good long-term investment strategy.
28

Which investment is best for someone who is likely to need cash soon?

A
mutual fund
B
CD
C
401(k)
D
savings account
29

What might convince an investor to buy stock or mutual funds?

A
belief that a company has just reached its peak popularity
B
news that a stock's price has recently increased significantly
C
belief that a small number of investors have bought the stock so far
D
news that a company is about to release a promising product
30

Which investment has the least liquidity?

A
mutual fund
B
house
C
checking account
D
small business
31

Which statements apply to a certificate of deposit (CD)? Choose two answers.

A
It is always purchased as a short-term investment.
B
It can be purchased from a banking institution.
C
It is always purchased as a long-term investment.
D
It can be purchased for almost any amount.
E
It is purchased through an individual's employer.
32

Which statement best describes stocks?

A
They should be purchased when prices are high and sold when prices are low.
B
They are an investment in a company’s progress and profits.
C
They are a type of investment that includes raw materials and natural resources.
D
They should be purchased only as long-term investments.
33

The image shows Gale's investments during one year. Investments during One Year

Question illustration
A
If she had purchased only the stock and had not diversified her investments, she would have lost money.
B
If she had diversified her investments further, her profits would have been considerably larger.
C
If she had put money in her savings account only and had not diversified, her profits would grow.
D
If she had diversified her investments further, she would have reduced her risk but made less of a profit.

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