AnswersOK-Personal Financial Literacy S1 – EDGNTY-83861 26-27Investment 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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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
3

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.
4

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.
5

[BLANK]

A
rates
B
returns
C
risks
D
rewards
6

Who regulates markets where investments are traded?

A
individual investors
B
the federal government
C
corporate entities
D
financial institutions
7

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.
8

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.
9

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.
10

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.

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