ECONOMICS
SAVING AND INVESTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Invest a large principal amount of money and then make no additional investments.
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Invest as long as possible and at the highest interest rate possible.
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Invest a small amount of money for a short period of time at the highest interest rate possible.
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Invest at a high interest rate because interest is the only factor that affects return.
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Detailed explanation-1: -When taking advantage of the time value of money, which of the following is most likely to result in the largest return? Invest as long as possible and at the highest interest rate possible.
Detailed explanation-2: -Over many decades, the investment that has provided the highest average rate of return has been stocks. But there are no guarantees of profits when you buy stock, which makes stock one of the most risky investments.
Detailed explanation-3: -Money market mutual funds provide investors with liquidity. That’s because these funds are invested in securities that mature in short periods of time and can be liquidated for cash.
Detailed explanation-4: -Generally, the higher the potential return of an investment, the higher the risk. There is no guarantee that you will actually get a higher return by accepting more risk. Diversification enables you to reduce the risk of your portfolio without sacrificing potential returns.