Level 13 Review Owning a Business, Risk Assessment, Investing

Which would be considered the highest risk investment type?

• Stock

• Bond

• Mutual Fund

• Money Market Account

The relationship between risk and return can be stated as

• 
  Higher risk indicates higher return

• 
  Lower risk indicates higher return

• Higher risk indicates lower return

• 
  No relationship exists between risk and return

If Jonathan is earning 2% on an investment and inflation is increasing by 3%, what is happening to his purchasing power?

• It's increasing

• It's not changing

• It's decreasing

• Inflation and purchasing power are not related

A _____ is a loan given to an organization while a _______ is partial ownership in the company.

• bond, ETF

• bond, stock

• stock, bond

• ETF, bond

What's the main difference between a Roth IRA and a Traditional IRA?

• Roth IRAs have higher interest rates

• Roth IRAs have higher fees

• Roth IRAs have you pay taxes upfront

• Roth IRAs are riskier investments

A diversified portfolio is desirable because

• It decreases risk

• It increases risk and return

• It limits investment choice

• It's a good predictor on rate of return

Why is it important to start investing as soon as possible?

• 
  You take less risk when you are young, so money will be safe

• You have more time for your money to compound

• Investing is an easy way to make quick money

• Fees on investments are cheaper when you are younger

A type of investment that invests in a lot of different companies is called

• Stocks

• Mutual funds

• 
  Bonds

• T-bills

What is a stock?

• 
  A loan an investor makes to a company or government that pays interest over time.

• An option to purchase something in the future at todays price.

• A collection of investments sold as a package.

• A share of ownership in a company

What is the primary reason for a company to issue stock?

• The stocks 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 greater awareness of the company