Investment Strategies EMPA Review

What is investing?

• Saving money in a bank account
• Spending money on goods and services
• Growing your money over time by putting it to work in financial instruments
• Borrowing money to purchase a home

How does investing differ from saving?

• Investing is less risky than saving
• Investing cannot earn higher returns over the long term
• Investing and saving are the same in terms of risk and potential returns
• Investing involves taking on varying amounts of risk for the potential to earn higher returns over the long term

What kind of interest is calculated on the original amount of money plus the accumulated interest of previous periods?

• Simple Interest
• Compound Interest
• Investment Interest

Why is compound interest more beneficial than simple interest?

• Your money grows faster when it is compounded

• You're taxed on simple interest, but not compound interest

• Fees for compound interest are greater than simple interest

• Compound interest is hard to calculate, so fewer use it

What is the time horizon for mid-term goals in investing?

• 10 years or more
• 5-10 years
• 1-5 years

What is the time horizon for long-term goals in investing?

• 10 years or more
• 5-10 years
• 1-5 years

How does an investor's time horizon influence asset allocation decisions?

• It has no impact on asset allocation

• A shorter time horizon requires more aggressive investments

• It determines the specific asset classes to avoid

• A longer time horizon allows for more aggressive investments

What is the risk that a borrower fails to make full and timely payments?

• Capital-Loss Risk
• Default Risk
• Inflation Risk
• Liquidity Risk

What is the risk that you can lose part or all of an investment?

• Capital-Loss Risk
• Default Risk
• Inflation Risk
• Liquidity Risk

What is the risk that the rate of return you get negatively affects your purchasing power over time?

• Capital-Loss Risk

• Default Risk

• Inflation Risk

• Liquidity Risk