Unit 7 Test Review

Many financial advisors recommend that investors diversify their investment portfolio. Which of the following is NOT true about a diverse investment strategy?

• It protects against risk

  
  

• 
  It is a strategy of having many different types of investments.

  
  

• 
  You will not lose any money with this strategy.

  
  

• 
  You will have a mix of risky and safe investments.

Tyler is 62 and married, He is hoping to retire next year, and he is evaluating his investment options. He currently has $3,000,000 to invest. Which low-risk investments would be the BEST choice for Tyler?

• junk bonds

• municipal bonds

• 
  An individual stock

  
  

• all of the above

Many people are advised by financial advisors to take risks. However risks are not for everyone. Which of the following people should NOT take risks in investing?

• 
  People close to retirement age

  
  

• young people

• 
  People who are meeting or exceeding their retirement goals

  
  

• People who have recently received an unexpected sum of money

Which of the following is NOT a common reason that teens today are saving their money?

• 
  Saving for a car

  
  

• saving for retirement

• saving for college

• saving for a trip for graduation

Which of the following is NOT a recommended strategy when investing in stocks?

• 
  Avoid investing solely in individual stocks

  
  

• 
  Sell your stocks when the market is going down

  
  

• 
  Hold onto your stocks, and don’t sell them even when the market goes down.

  
  

• buy when the price is low

A ________ allows you to store your money in a bank while earning interest.

• checking account

• municipal bond

• mutual fund

• savings account

Investing is for the short-term, while saving is for long-term.

• True

• False

Kaitlyn is 19 years old, and her grandmother recently passed away. She was surprised to learn that her grandmother left her $500,000 in her will. Which mid-risk investment would you recommend for Kaitlyn?

• 
  a regular savings account

  
  

• 
  US Government Savings Bonds

  
  

• mutual funds

• money market account

A great rule of thumb is to

• 
  pay your bills first

  
  

• 
  start saving and investing when you turn 30

  
  

• pay yourself first

• 
  save all the money left over at the end of the month

Using the simple interest formula, calculate the interest earned on $7000 after 2 years at 8% return.

• 
  $112.00
  

• 
  $1,120.00
  

• 
  $11,200.00
  

• 
  $11.20