Finance Basics for Students

Recommend a stock for long-term investment and explain your choice.

Justify the importance of diversification in investment options.

Identify three potential sources of passive income for individuals.

Explain the concept of wealth accumulation through compound interest.

Define the difference between income and wealth with examples.

• Income is the total value of debts, while wealth is the money saved.

• Income is the money received irregularly, while wealth is the total value of liabilities.

• Income is the total value of assets owned, while wealth is the money received regularly.

• Income is the money received regularly, while wealth is the total value of assets owned.

Describe the risks associated with investing in high-risk stocks.

Assess the benefits of investing in real estate compared to stocks.

Justify the role of emergency funds in financial planning.

• Emergency funds are meant to be used for regular expenses to avoid budgeting.

• Emergency funds are unnecessary and only tie up money that could be invested for higher returns.

• Emergency funds provide a safety net for unexpected expenses or income disruptions, preventing individuals from going into debt or liquidating investments.

• Emergency funds are only for the wealthy and not applicable to the average person.

Evaluate the impact of inflation on long-term savings.

• Inflation increases the real value of long-term savings.

• Inflation only impacts short-term savings.

• Inflation has no impact on long-term savings.

• Inflation reduces the real value of long-term savings.

Assess the advantages and disadvantages of investing in mutual funds.