Investing

How can investors receive compounding returns?

• By selecting a savings account that has a higher interest rate

• By investing their earnings back into their original investment

• By transferring their earnings into a high-risk investment

• By diversifying their investment portfolio

Diversification is important in investing because…

• It helps you to balance your risk across different types of investments.

• It increases your overall risk, which guarantees that you will make more money.

• It ensures that you only make low-risk investments.

• It helps you gain the highest rate of return despite any risks.

Which of the following correctly orders the investments from LOWER risk to HIGHER risk?

• Treasury bond − Stock − Diversified mutual fund

• Stock − Treasury bond − Diversified mutual fund

• Treasury bond − Diversified mutual fund – Stock

• Diversified mutual fund − Treasury bond − Stock

Which of the following is generally true about 401(k) and 403(b) retirement plans?

• They are plans offered through employers.

• They offer some tax benefits.

• They restrict when you can withdraw your money.

• All of the above

What is the primary reason to issue stock?

• To help investors earn a higher rate of return

• To raise money to grow the company

• To distribute the risk of bankruptcy across more investors

• To increase investor awareness of the company

What is a possible reason a company would sell stock?

• To hire more people

• To expand its business

• To develop new technology

• All of the above

Which is the largest stock exchange?

• New York Stock Exchange

• NASDAQ

• Dow Jones

• S & P 500

Investors nearing retirement will typically shift their investment portfolios to include ________ risk investments.

• lower

• moderate

• higher

• None of the above

Which investment is the most risky?

• bond

• stock

• mutual fund

• savings account

Which type of investment is the least risky?

• stock

• bond

• mutual fund

• savings account