Financial Math: Why Invest in Stocks?

Why is investing in stocks considered a smart financial decision according to the text?

• It requires a large initial investment.

• It is a way to make your money work for you and build long-term wealth.

• It guarantees financial success.

• It is the only option for securing your financial future.

What is a 'time horizon' in the context of finance and accounting?

• The specific date when stocks are bought and sold.

• The amount of risk associated with an investment.

• The length of time that an investment is held for.

• The historical performance of the stock market.

If you have $1,000 in a savings account with a 3% interest rate, how much will you have at the end of the year? (a)  

• $1,000
• $1,030
• $3,000
• $1,300

What do people usually invest in when their savings balance grows and they hope to earn more than what the bank is paying in interest?

• Only in stocks.

• Only in real estate.

• In assets like real estate, stocks, bonds, and/or gold.

• They keep it in the savings account for increased interest.

What does the US Stock Market represent in the context of investment options?

• The average return of the biggest companies in the United States.

• The average of all stocks trading in the United States.

• The average of start-up companies.

• Short-term government bonds that are issued or guaranteed by the United States.

What is the characteristic of Long-Term Corporate Bonds?

• Issued for less than 5 years and have a high return.

• Issued by companies for more than 5 years and have a lower return than stocks.

• Considered risky and have a high chance of going bankrupt.

• Investing in property and buildings.

What is the main reason that gold tends to increase in price?

• During years with high inflation.

• During years with low inflation.

• When the stock market performs the best.

• When the stock market performs the worst.

According to the chart, how much would $100 invested in stocks in 1972 be worth in 2018?

• $401

• $500

• $1,612

• $161,200

What would be the approximate value of a $10,000 investment in stocks from 1972 to 2018?

• $40,100

• $161,200

• $401

• $1,612

Which asset class had the best average return from 1986 through 2018 according to the chart?

• Large-Cap Stocks

• Small-Cap Stocks

• S&P 500 Stocks

• Long-Term Bonds