PF Unit 5 Review Lessons 1,4,6, & 7

Jose, Eric, Gabriel, October, and Jazleen are discussing investment strategies. Who's reasoning is incorrect?

• Jose believes investing can minimize the impact of inflation, which causes him to lose purchasing power

• Eric thinks investing is to earn a consistent rate of return with lower risk than his typical savings account

• Gabriel suggests investing is to build wealth by reinvesting his returns and allowing them to compound

• October says investing is to earn higher average rates of return than she would in her typical savings account

Bianca has $500 in her piggy bank that she earned from her summer job. She decides to put that money in a savings account that earns 1% annual interest and leaves it there for 5 years. Meanwhile, the cost of her favorite comic books increases by an average of 2% per year due to inflation. What happened to the purchasing power of Bianca's savings?

• It increased

• It decreased

• It stayed the same

• It matched inflation

Elijah has just started his first job and is considering investing a small amount of his salary each month. What is the benefit of Elijah starting to invest early, even with a small amount?

• Elijah's investments are likely to grow more since compounding means returns get larger over time

• Elijah is guaranteed higher returns since compounding reduces the risks of investing

• Elijah can use his investments to meet short-term financial goals since he doesn’t need to hold them as long

• Elijah can take advantage of brokerage discounts for long-term investors

Bianca, Jazleen, Nico, Eric, and Jayden are discussing about investing in stocks. Who's statement about stocks is FALSE?

• Bianca: Owning a stock means you own part of a company

• Jazleen: Companies sell stocks to raise money for their business

• Nico: Stocks are guaranteed to increase in value over time

• Jayden: Stock prices can be affected by things like the news and false rumors

Nico is interested in starting to invest and asks his friends Edgar, Gabriel, Jessica, and Elijah for tips. Who is providing sound advice on how to invest?

• Edgar: “You’ve got to time the market. That’s how most people make money investing.”

• Gabriel: “Trends are hard to predict, and that makes timing the market difficult.”

• Jessica: “You can look at a past trend in a stock and know how it’ll behave in the future.”

• Elijah: “Always follow market trends - buy in a bull market and sell in a bear market.”

Gabriel is considering buying shares in a tech startup, Shicco's Tech. If the price of the shares grows as Shicco's Tech grows, how does this benefit Gabriel as an investor?

• Gabriel will be able to decide what Shicco's Tech sells and set the price

• Gabriel will be able to sell these shares for a higher price and make a profit

• Gabriel will be able to enjoy free services from Shicco's Tech

• Gabriel will be able to put Shicco's Tech on his resume

Lonnel, Montana, and Edgar are planning to invest their savings. They are considering three common assets for allocation. What could be their choices?

• Stocks, bonds, and bond funds

• Stocks, bond funds, and mutual funds

• Stocks, real estate, and cryptocurrency

• Stocks, bonds, and cash

Eric has invested in a bond. The annual interest rate of this bond is called the ______ rate. Can you help Jazleen identify what it is called?

• Face value

• Coupon

• Maturity

• Discount

Jayden, Eric, Kayley, Lonnel, and Sanyah are discussing investment strategies. (a)   statement is not a benefit of diversification.

• Jayden believes that diversificatio
• Eric thinks that diversification en
• Kayley says that diversification sm
• Lonnel suggests that diversificatio

Match the following investment types with their typical share price fluctuations.

• Low volatility investment

• Jayden's individual stock prices and Eric's bond funds cannot be compared at all

• High volatility investment

• Jayden's individual stock prices typically fluctuate less than Eric's high grade bond funds do

• Incomparable investment

• Jayden's individual stock prices typically fluctuate more than Eric's high-grade bond funds do

• Similar volatility investment

• Jayden's individual stock prices and Eric's bond funds typically fluctuate almost identically