Unit 4 8A-H Investment Knowledge Flashcard

Front

What is the main benefit of starting to invest early and contributing continuously?

Back

It allows for exponential growth due to compound interest over time

Front

If you invest $1,000 at an 8% annual return and make no additional contributions, approximately how much will your investment grow in 9 years?

Back

$2,000

Front

According to the Rule of 72, how many years will it take for savings to double at an interest rate of 9%?

Back

8 years

Front

If your interest rate is 12%, the Rule of 72 estimates that your investment will double in approximately:

Back

6 years

Front

Which of the following savings options is typically FDIC-insured and provides the highest security but lower returns?
Options: Certificate of deposit, Money market mutual fund, Stocks, Bonds

Back

Certificate of deposit

Front

A money market account generally:

Back

Combines checking features with a higher interest rate than a traditional savings account

Front

Which investment typically carries the highest level of risk but also the potential for high returns? Options: Bonds, Mutual funds, Stocks, Certificates of deposit

Back

Stocks

Front

Exchange-traded funds (ETFs) are best described as:

Back

Funds traded like stocks that contain a diversified portfolio

Front

What is one key benefit of pre-tax investments, like traditional IRAs or 401(k) plans? Options: Taxes are avoided completely, Contributions reduce current taxable income, Withdrawals are tax-free, There is no penalty for early withdrawal

Back

Contributions reduce current taxable income

Front

A post-tax investment, such as a Roth IRA, provides which of the following benefits? Immediate tax deductions on contributions, Tax-free growth and tax-free withdrawals in retirement, Higher returns than a traditional IRA, Required withdrawals at age 72

Back

Tax-free growth and tax-free withdrawals in retirement