5. Which of the following accurately describes a difference between an ndividual bond compared to a bond fund? A bond pays you dividends while a bond fund pays you regular interest A bond guarantees you a higher rate of return than a bond fund A bond is issued by a company while bond funds only invest in government Bonds A bond is considered to be a less diversified investment than a bond fund Daniel has saved 2,000 in a savings account that earns 0.5% interest nnually. What will most likely happen to the purchasing power of his avings over time? His purchasing power will DECREASE because the interest rate is lower than the historical rate of inflation His purchasing power will INCREASE because the interest rate is higher than the historical rate of inflation His purchasing power will INCREASE because the interest will compound faster than the historical rate of inflation His purchasing power will remain the SAME because the interest rate is the same as the historical rate of inflation 1 point

The correct answer for the first question is:<br /><br />D. A bond is considered to be a less diversified investment than a bond fund.<br /><br />Explanation:<br />- A bond is a single investment, typically issued by a company or government, and represents a fixed income security with a specific interest rate and maturity date.<br />- A bond fund, on the other hand, is a type of investment vehicle that pools money from many investors to purchase a diversified portfolio of bonds. This diversification helps to spread out the risk compared to investing in a single bond.<br /><br />The correct answer for the second question is:<br /><br />A. His purchasing power will DECREASE because the interest rate is lower than the historical rate of inflation.<br /><br />Explanation:<br />- Inflation refers to the general increase in prices and decrease in the purchasing power of money over time.<br />- If the interest rate on Daniel's savings account is lower than the historical rate of inflation, the real rate of return (the interest rate adjusted for inflation) will be negative.<br />- This means that the purchasing power of Daniel's savings will decrease over time, as the interest earned will not keep pace with the rising prices due to inflation.