Investing Quiz

Which of the following BEST describes investing?

• An arrangement between an individual and an insurance company to protect the individual against risk

• The ability of a consumer to obtain goods and services based on the trust that payment will be made later

• The act of committing your money with the expectation of obtaining additional income

• Payments individuals and businesses are required to make to local, state, or federal governments

What is the difference between saving and investing?

• Saving is not spending your money / Investing is making your money grow

• Saving is making your money grow / Investing is not spending your money

• Saving is used for retirement / Investing is used for short-term goals

• There is no difference between saving and investing

Which of the following is NOT a reason to invest your money?

• Diversify your income

• Save for retirement

• Achieve your future financial goals

• To keep your money safe from theft

Which two factors are MOST important when investing?

• Time and experience

• Time and compounding (interest)

• Compound interest and credit scores

• Credit score and risk

What is the relationship between risk and rate of return?

• The higher the risk, the lower the return

• The lower the risk, the higher the return

• The higher the risk, the higher the rate of return

• No relationship exists between risk and rate of return

Which of the following investments has the HIGHEST risk?

• Bonds

• Savings account

• Certificates of Deposit (CD)

• Stocks

Which of the following investments allows for the greatest amount of diversification?

• Mutual funds

• Savings account

• Certificates of Deposit (CD)

• Stocks

Which of the following investments involves buying property with the hope of earning a capital gain (profit on your investment)?

• Mutual funds

• Real estate

• Certificates of Deposit (CD)

• Stocks

Which of the following investments offers higher interest rate than savings account, but has a large penalty for early withdrawal?

• Mutual funds

• Real estate

• Stocks

• Certificates of Deposit (CD)

Which of the following is NOT true about long-term investing?

• Has the advantage of compound interest for longer periods of time

• Offers a regular source of income

• Less risk involved

• Lacks liquidity (ability to access the money for cash)