Question

cody has invested $12,000 total. he has invested $3,000 in stocks, $2,000 in a certificate of deposit, and $5,000 in government bonds. codys stocks are currently performing poorly. he has purchased $2,000 worth of an automotive companys stock, and its value has steadily dropped over the last year. he is reluctant to sell the stock because he is worried about how much money he has already invested. which investment practice is cody following? buying commodities short - term investing diversifying investments an account with 5% interest, in how many years would his money double? about 14 years

Explanation:

Step1: Analyze investment types

Cody has invested in stocks, a certificate - of - deposit, and government bonds. This is diversifying investments as he spreads his money across different asset classes.

Step2: Identify the problem with his behavior

He holds onto a poorly - performing stock because of the money already invested, which is the sunk - cost fallacy. He fails to avoid the emotional attachment to a failing stock.

Step3: Calculate the time for money to double

We use the rule of 70. The formula for the rule of 70 is $t=\frac{70}{r}$, where $r$ is the interest rate. Given $r = 5\%$, then $t=\frac{70}{5}=14$ years.

Answer:

Which investment practice is Cody following? - diversifying investments
What has he failed to avoid? - emotional attachment to a failing stock
If he put the total amount in an account with 5% interest, in how many years would his money double? - about 14 years