Personal Finance Objective 5.03

A bond is:

• a share of ownership in a company
• a type of debt that a company issues to investors for a specified period of time
• a type of investment tha  is only offere by depository institututions
• a type of investment that has the potentioal for significant fluctuations over a short period of time.

Which statement is true of mutual funds?

• Mutual funds are diversified investments
• Mutual funds are speculative investments
• Mutual funds are superior purchasing to single stock
• Mutual funds are a form of real estate investmenet.

The most common relationship between risk and return in investing can be state as:

• no relationship exists between risk and return
• lower risk indicates higher return
• higher risk indicate higher return
• higher risk indicates lower teturn

Which is not true in regards to investing in stock?

• A stockholder owns a part of a company
• A stockholder may or my not receive a dividend
• A stockholder will always receive  profit when the stock is sold
• Depending upon the current market price, stodholders may pay differenet prices fo the soame sto

Joshua wants to purchase stocks with the money he received from this tax return. Who would he contact to make the transaction?

• A real estate agent
• A brokerage firm
• The New York Stock Exchange
• Joshua should complete this transaction on his own 

What is inflation?

• The rise in the general level of prices
• The projected value of an investment at the end of a specified time frame
• The uncertainty about the return on an investment
• The number of times something happens to money

A diversified portfolio is desirable because it:

• limits investor choices to only one or two investment tools
• increases the risk/return ratio
• decreases risk by investing money in a variety of investment tools
• indicates an investor is a good predictor of the return an investment will have 

In relation to the rate of inflation, it is best to have the rate of return on an investment:

• lower, in order to minimize taxes
• higher, to minimize risk
• lower, in order to minimize risk
• higher, to maintain purchasing power.

Eli is looking for an investment that is structured to have tax benefits.  He should look for information on:

• tax-advantaged investments
• index funds
• tax-rated bonds
• speculative investments

Which statement is true with regard to paying taxes on investments?

• Since investments are considered unearned income, taxes do not have to be paid on earnings
• Taxes only have tot be paid on employer-sponsored investment accounts
• Taxes are always paid on investments either when the money is placed in the investment or removed from the investment
• Taxes are often owed on profits generated from investments