Georgia Assessments for the Certification of Educators GACE Practice Test

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An individual who is about to retire and wants to earn interest without risking his or her principal would most likely be advised to invest in:

A mutual fund
An index fund
U.S. Treasury bonds
Value stocks

The correct answer is: A mutual fund

The individual looking to earn interest without risking their principal would find U.S. Treasury bonds to be the most suitable option. These bonds are backed by the full faith and credit of the U.S. government, which makes them one of the safest investments available. They offer a fixed interest rate over a specified period, providing a predictable income stream, which is particularly appealing for retirees who may rely on this income. Investing in mutual funds or index funds, while potentially offering growth and diversification, can still involve risks to the principal due to market fluctuations. Value stocks can provide significant returns over time but come with higher volatility and risk, which may not align with the goal of preserving capital in the approach to retirement. Therefore, U.S. Treasury bonds are the most appropriate choice for someone aiming for safety and stability in their investment as they enter retirement.