Question

multiple choice 1 point
what is a disadvantage of saving for your retirement in a traditional savings account?
○ savings accounts are very costly to maintain, and the fees will reduce your savings in the long - term
○ savings accounts earn very little interest, and your growth may not keep pace with inflation
○ savings accounts are not very safe, and you could lose all your money
○ savings accounts are traditionally used for bill pay, and you will likely change accounts before your retirement bills are due
7 multiple choice 1 point
allen told you that it’s a good investment strategy to diversify your portfolio. what is he suggesting you do to have an investment portfolio that is diversified?
○ investing in a variety of assets to spread out the risk
○ not buying shares that are popular during a given day
○ only buying stocks when their prices are low
○ using various methods of research to be sure that your investments are good ones

Explanation:

First Question (Disadvantage of traditional savings for retirement)

• Analyze each option:
• Option 1: Traditional savings accounts usually have low or no maintenance fees, so this is incorrect.
• Option 2: Savings accounts have low interest rates. Over time, inflation can outpace the growth from this low interest, making it a disadvantage for long - term retirement savings.
• Option 3: Savings accounts are insured (e.g., FDIC in the US) and are very safe, so this is wrong.
• Option 4: Savings accounts are for saving, not typically for bill pay in a way that would deplete retirement savings, and the statement is illogical.

• Recall the definition of portfolio diversification:
• Option 1: Diversification means investing in different types of assets (stocks, bonds, real estate, etc.) to spread out risk. If one asset performs poorly, others may perform well.
• Option 2: Not buying popular shares has nothing to do with diversification.
• Option 3: Buying stocks only when prices are low is a timing strategy, not diversification.
• Option 4: Using research methods to pick good investments is about investment selection, not diversification.

Answer:

The second option (Savings accounts earn very little interest, and your growth may not keep pace with inflation)

Second Question (Diversified investment portfolio)