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

Investment Strategies Answers

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1
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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.
2
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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.
3

Who regulates markets where investments are traded?

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

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
5

Which is a commodity someone might invest in?

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

[BLANK]

A
rates
B
returns
C
risks
D
rewards
7

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.
8

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.
9

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.
10

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.

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