Investment Strategies — Quiz Answers

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1
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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 buying CDs and US government bonds
B
by opening an IRA and investing in a new business
C
by enrolling in a 401k and investing in the stock market
D
by opening a savings account and investing in commodities
2
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Which investor is making a common error?

A
an employee of a popular software company who invests in many similar companies
B
someone who buys stock in both domestic and more risky international companies
C
an employee of a popular hardware store who invests only in that company’s stock
D
someone who sells the slumping stock while they are still able to make a profit based on what they paid
3

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 employer who may match contributions.
D
A 401k is created by an individual who deposits money.
4

Which are common mistakes people make when investing? Choose four correct answers.

A
They analyze their comfort level with the types of risk they will take.
B
They hold onto investments longer than they should to recoup losses.
C
They focus heavily on familiar investment opportunities.
D
They divide their funds between more risky and less risky options.
E
They put all of their money into one kind of investment at a time.
F
They invest more money than they can afford.
5

Which is a commodity someone might invest in?

A
government bonds
B
a mutual fund
C
a certificate of deposit
D
natural resources
6

Which are common mistakes people make when investing? Choose four correct answers.

A
They analyze their comfort level with the types of risk they will take.
B
They divide their funds between more risky and less risky options.
C
They invest more money than they can afford.
D
They focus heavily on familiar investment opportunities.
E
They hold onto investments longer than they should to recoup losses.
F
They put all of their money into one kind of investment at a time.
9

People who make money investing in the stock market

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

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