Interview
Financial Literacy Honors 4.02 Taking Risks Worksheet Answers
- Course
- Institution
Correct answers for this assignment. Florida virtual financial literacy honors lesson 4.02 assignment
[Show more]
Content preview
04.02 Taking RisksUse this chart to take notes from the lesson. You may also research from outside sources, however, be sure to cite these in MLA format. You must choose
three different
investments, one from
each different risk level
(aggressive, moderate, and conservative).
Then respond to the questions in part two.
Part One—Review the Investment Types
Type of Investment
Explain what the investment is and how it works.
Explain the level of risk and potential return on investment.
Provide a real-world example of this investment.
Discuss how taxes, fees, and inflation could positively or negatively impact this investment and how.
Investment Choice #1
Certificate of Deposit (CD) - This is a safe way to save money, but it is hard to get out if needed. Liquidity is offered with a penalty. It also requires a minimum deposit to invest.
This is a conservative investment. It earns more money than a traditional savings account. The interest rate increases with the term of the investment. The risk is low, but the market price is high and the rate of return is low.
One example of a certificate of deposit is offered by the Bank of America. One of their products comes with a minimum balance of $10,000 with an option to choose terms between 7-35 months.
Any interest earned over $10 is usually taxable and must be reported to the IRS. This puts a dent in my overall return. I may get charged a fee if I want to take my money out before the term is over. As inflation rises, interest rates usually rise along with it. What I considered a good CD rate at the time of purchase may no longer be competitive in the future.
Investment Choice #2
A mutual fund is a share of ownership in a mixture of companies. It requires a minimum amount of money to invest.
A mutual fund can earn significantly more money, but there is also the risk to potentially lose more.
One of the most popular mutual funds available is the Vanguard S&P 500 index fund, which owns the 507 total stocks that are represented in the S&P 500 index. It charges a very low expense ratio to investors. The
Taxes are paid on mutual fund earnings. There are 2 types of mutual fund fees: annual fund operating expenses and shareholder fees. Inflation can erode the value of investment returns over time.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller vncnt455. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $3.98. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
77254 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now