Investing Unit Test

Front

All of the following are reasons to invest, EXCEPT…
Options: To minimize the impact on inflation, which causes you to lose purchasing power, To earn a consistent rate of return with lower risk than typical savings accounts, To build wealth by reinvesting your returns and allowing them to compound, To earn higher average rates of return than you would in a typical savings account

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To earn a consistent rate of return with lower risk than typical savings accounts

Front

What is a stock?

Back

An investment option that allows you to own a small piece of a company.

Front

Which of the following most accurately describes what a bond is? Options: A bond is a government loan made to an individual investor with the expectation that it will be paid back with interest, A bond is an investment in which a corporation lends an individual investor money with the expectation that it will be paid back with interest, A bond is a government loan made to a corporation with the expectation that it will be paid back with interest, A bond is an investment in which an investor lends money to a corporation or government with the expectation that it will be paid back with interest

Back

A bond is an investment in which an investor lends money to a corporation or government with the expectation that it will be paid back with interest.

Front

All of the following are strategies to reduce risk EXCEPT… Holding your investments for at least five years, Making sure your investments are diversified, Hiring an investment manager who you think can beat the market, Investing small amounts of money over longer periods of time

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Hiring an investment manager who you think can beat the market

Front

What does it mean when someone says “Good investing is boring”?

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You’re better off making long-term investments that don’t require day-to-day management

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In retirement, it’s common to rely on income from all of the following sources EXCEPT... Social Security, Pension Income, Government loan, Investment Income

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Government loan

Front

How does investing in the stock market differ from putting money in a savings account at a bank?

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Investing allows you to accumulate wealth for retirement while saving is best for short-term purchases or emergencies.

Front

Which of the following statements is TRUE about compound interest? Compound interest is difficult to calculate, so those who use it earn higher profits for their efforts, Compound interest means you have a fund manager who is compounding your returns without charging a fee, Compound interest allows you to earn interest not only on the amount you have saved, but also on the interest you've already earned, Compound interest directly impacts how much you will be charged in fees

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Compound interest allows you to earn interest not only on the amount you have saved, but also on the interest you've already earned.

Front

What kinds of behaviors can PREVENT people from making smart investing decisions? Options: Staying calm when the market is experiencing a downturn, Buying stocks when prices are low and selling them when they’re high, Exiting the market because that’s what everyone else is doing, Investing in a diversified portfolio instead of trying to beat the market

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Exiting the market because that’s what everyone else is doing

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Why is diversification a recommended investment strategy?

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Diversifying your portfolio helps reduce risk.