Section 6.1: Investments

Front

What is the primary goal of investing?

Back

To increase wealth over time

Front

Which of the following is a characteristic of a short-term investment? Held for more than a year, Typically has higher returns than long-term investments, Held for a year or less, Always involves high risk

Back

Held for a year or less

Front

What does risk tolerance refer to in investing?

Back

The amount of uncertainty a person is willing to handle

Front

Which of the following is NOT a condition that indicates readiness to invest? Having an emergency fund with savings of eight to ten months of living expenses, Paying finance charges higher than any earnings on an investment, Having adequate insurance protection, Paying essential living expenses with discretionary income left over

Back

Paying finance charges higher than any earnings on an investment

Front

What is diversification in the context of investing?

Back

Spreading risk by putting money in different types of investments

Front

Which factor is NOT used to characterize investments? Degree of volatility, Rate of return, Risk, Amount of insurance coverage

Back

Amount of insurance coverage

Front

What is the rate of return in investing?

Back

The amount earned on an investment for a given period of time

Front

How can an investment portfolio help in achieving financial goals?

Back

By providing a collection of investments tailored to individual goals

Front

What is liquidity in the context of investments?

Back

The ease with which an investment can be converted to cash without losing value

Front

Which of the following is a benefit of investing? Guaranteed returns without any risk, Avoiding all forms of taxation, Ensuring complete financial security

Back

Increasing wealth and earning a steady income