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Question: John receives $1,000 as a graduation gift from his grandparents. Rather than spend it, he decides to invest it in a two-year bond that earns 3% simple interest. John doesn’t need access to the money right away because he wants to save it for when he’s ready to buy a home in about 10 years. Is the bond a wise investment for John? Why or why not? What other investment options does John have?
Yes, a two-year bond is a wise investment for John. It provides a safe, guaranteed return with minimal risk. The 3% simple interest rate is a relatively low return, but it is guaranteed and will lock in his money for the foreseeable future. John has several other investment options available to him as well, such as stocks, mutual funds, and exchange-traded funds. He could also consider investing in real estate, cryptocurrency, or other alternative investments.
Jan. 4, 2023, 8:33 a.m.
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