Saving, Investing, and Building Wealth

What is an investment?

• Anything you acquire for future income or benefit

• A type of savings account

• A loan from a bank

• A type of insurance policy

What is compound interest?

• Interest that is charged for purchases on a credit card

• Interest that is paid on previously earned interest as well as the original deposit or investment

• Interest that is earned from a savings account

• Interest that is paid on a loan

What is the advantage of compound interest?

• It helps you build wealth faster

• It allows you to withdraw money from your savings account without penalty

• It guarantees a fixed rate of return on your investments

• It reduces the amount of taxes you owe

What is the relationship between risk and expected return?

• The higher the risk, the higher the expected return

• The lower the risk, the higher the expected return

• Risk and expected return are not related

• The higher the risk, the lower the expected return

What is a savings account?

• An investment that allows you to buy shares of multiple companies

• A type of insurance policy

• A loan from a bank

• A bank account that earns interest on your deposits

What is a bond?

• A type of insurance policy

• A loan from a bank

• A bank account that earns interest on your deposits

• A debt investment where you lend money to an issuer

What are U.S. savings bonds?

• Bonds issued by the U.S. Treasury that are backed by the federal government

• Bonds issued by state governments

• Bonds issued by corporations

• Bonds issued by foreign governments

What is a stock?

• A type of insurance policy

• A loan from a bank

• A bank account that earns interest on your deposits

• A share of ownership in a company

What is a dividend?

• A type of insurance policy

• A loan from a bank

• A payment made by a corporation to its shareholders

• A bank account that earns interest on your deposits

What is a mutual fund?

• A type of insurance policy

• A loan from a bank

• A bank account that earns interest on your deposits

• An investment vehicle that pools money from multiple investors to invest in a diversified portfolio of securities