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Determine whether each scenario is an example of saving or investing. Match each example to the correct category.

- Purchasing stock for long-term growth
- Purchasing bonds that pay interest of 5% and holding them until maturity
- Using a bank money market account that earns 2% interest

**Saving:**
- Using a bank money market account that earns 2% interest

**Investing:**
- Purchasing stock for long-term growth
- Purchasing bonds that pay interest of 5% and holding them until maturity

Answer :

Final answer:

In the provided scenarios, purchasing stock and bonds are examples of investing, while using a bank money market account is an example of saving. Recognizing these categories aids in making informed financial decisions. It's essential to distinguish between actions taken for growth versus those for stability.


Explanation:

Saving vs. Investing

When categorizing different financial actions, it is essential to understand the difference between saving and investing. Below are the scenarios presented:

  • Purchasing stock for long-term growth: This is an example of investing. When you buy stocks, you are purchasing shares of a company and hoping that their value will increase over time, allowing you to sell them for a profit.
  • Purchasing bonds that pay interest of 5% and holding them until maturity: This scenario also qualifies as investing. Bonds are a form of debt security where you lend money to the issuer (like a corporation or government) and receive interest in return, indicating a commitment to earning returns over the bond's term.
  • Using a bank money market account that earns 2% interest: This is an example of savings. Money market accounts are typically more stable and are designed for saving rather than seeking high returns like stocks or bonds.

Understanding these categories helps individuals make informed financial decisions regarding their money.


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