investments unit review

Elijah puts $100 a month for 40 years into a savings account with 2% interest that is compounded yearly. Makayla invests $100 a month for 40 years into the stock market with an average annual return of 7%. Who will have more money for retirement?

• Elijah, because his investment earns a higher interest rate.

• Makayla, because her investment earns a higher interest rate.

• Elijah, because he has put more money into his investment.

• Makayla, because she has put more money into her investment.

Brianya starts putting $100 a month into the stock market at age 25 at an average annual return of 7%. She does this for 40 years. Alaajah starts putting $500 a month into the stock market at age 50 at an annual return of 7%. She does this for 15 years. At age 65, who will have more money? Why?

• Brianya, because her money had more time to compound.

• Alaajah, because she put in more money.

• Alaajah, because her interest rate was higher.

• Brianya, because her interest rate was higher.

Daron goes house shopping. He sees a house he likes that costs $50,000. He plans to save $5,000 a year for the next 10 years to buy the house. Will he have enough money in 10 years for this house?

• Yes, because $5,000 x 10 years = $50,000.

• No, because the interest rate probably went up after 10 years.

• No, because inflation will make the house more expensive in 10 years.

• Yes, because inflation will make his money worth more in 20 years.

Which two investments are a good idea if you have time for your investment to grow and want your money to grow faster than the inflation rate?

• real estate

• bonds

• stocks

• savings accounts

Which of the following is false about time horizon?

• It refers to the amount of time before you will need the money in your investment.

• It affects how much risk you should be willing to take with your investment.

• If you have a long time horizon, you should put your money in a safe place, such as a savings account.

• If you have a long time horizon, you can put your money in a riskier investment, such as stocks or a high-growth mutual fund.

Which of the following is false about bankroll?

• It refers to the amount of time before you will need the money in your investment.

• It refers to how much you can stand to lose.

• A rich person can probably stand to lose more of their money than a poor person.

• A poor person probably has a smaller bankroll than a rich person.

Which of these things is NOT part of the same category?

• mutual funds

• inflation funds

• index funds

• ETFs

Organize these options into the right categories

Groups:

(a) good advice

,

(b) bad advice

• If you need the money soon, put it in the stock market.

• If you need the money soon, put it in a savings account.

• If you invest money in a savings account, it will beat inflation.

• If you don't need the money soon, put it in a riskier investment.

• You should only invest money that you can afford to lose. (Not your rent money for next week!)

• Keep your retirement account money in a savings account.