Savings and investing

Which investment choice has the LEAST amount of risk? Choose 1.

• Individual Stock

• Stock Mutual Fund

• Bond

• Collectibles

Answer explanation

Bonds are lowest risk because they promise to return the original value of the bond to the owner at a certain date, plus they pay the interest rate they state up front.

Check all of the SAVINGS accounts

• Deposit Account

• Certificate of Deposit (CD)

• Mutual Fund

• Money Market Account

Which of the following is an advantage of a Mutual Fund compared to a Stock?

• Lower cost

• Lower risk

• Available at a bank

• FDIC insured

Answer explanation

Mutual funds are lower risk because of DIVERSIFICATION. The investor owns shares in a portfolio of many stocks managed by a professional investor.

Draw a pyramid with 3 levels. Write a low risk investment in the bottom, a medium risk in the middle, and high risk on the top

Answer explanation

Low risk: bonds, deposit account, CDs, money market account

Medium risk: mutual funds, real estate

High risk: stocks, collectibles, cryptocurrency, penny stocks

Which of these pay INTEREST? Check all that apply.

• Stocks

• Bonds

• Money Market Accounts

• Crypto

Answer explanation

Bonds and money markets pay interest. Stocks and crypto only make money for the investor if their value goes up and they are sold.

Which of these portfolios is the most DIVERSIFIED?

• 50% Stocks

  50% Collectibles

• 10% Stocks

  30% Mutual Funds

  30% Bonds

  30% Real estate

• 100% Mutual Funds

• 50% Deposit Savings

  50% Real Estate

Answer explanation

Green spreads investments across 4 different types and risk levels so it's the most diversified.

Gary deposits $1000 in a Deposit Savings account that earns 1.5% simple interest each year. He makes no other deposits or withdrawls. How much money is in the account at the end of the year?

• $1000

• $1150

• $1015

• $1001.50

Answer explanation

Interest earned =

$1000 * 1.5/100 = $15

Amount in account =

$1000 + $15

Use the Rule of 72 to calculate how many years it will take to double an initial $1000 investment put into a Deposit Savings Account at a 1.5% interest rate. Type the number of years.

Answer explanation

You can estimate how many years it takes to double an investment by dividing 72 by the rate of return (which in this case is the interest rate).

Years = 72/1.5 = 48

If you invested $1000 in a mutual fund that has an average annual return rate of 8%, how many years will it take to double your investment? Use the Rule of 72 and enter the number of years.