Saving & Investing

What is a savings account primarily used for?

• High-risk investments

• Storing money safely while earning a little interest

• Trading low-risk stocks and bonds

• Storing money that you receive from employment and use to pay your bills.

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DOK Level 1: Recall

Which type of savings account typically offers the highest interest rate?

• Basic savings account

• Certificate of Deposit (CD)

• Checking account

• Money market account

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DOK Level 1: Recall

What does it mean to buy a stock?

• Lending money to the government

• Owning a portion of a company

• Saving money in a bank

• Borrowing money from a broker

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DOK Level 1: Recall

What is the primary purpose of diversification in an investment portfolio?

• To increase the complexity of the portfolio

• To focus solely on high-risk assets

• To reduce risk by spreading investments across various assets

• To guarantee a profit on investments

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DOK Level 1: Recall

Which of the following best describes the relationship between risk and return in investing?

• Higher risk guarantees higher returns

• Lower risk guarantees higher returns

• Higher risk generally involves the potential for higher returns

• There is no relationship between risk and return

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DOK Level 1: Recall

What is the primary function of a stock market?

• To facilitate the exchange of commodities

• To provide a platform for buying and selling stocks

• To secure loans for government projects

• To offer savings accounts to individuals

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DOK Level 2: Skill/Concept

Why is it important for an investor to understand their own risk tolerance?

• It determines the color of their investment portfolio

• It helps in choosing the right types of investments that match their comfort with risk

• It is required by law

• It affects the interest rates on savings accounts

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DOK Level 2: Skill/Concept

Why might an investor choose to invest in a mutual fund?

• To gain direct control over the choice of individual stocks

• To avoid any type of financial risk

• To benefit from professional management and diversification

• Because mutual funds guarantee a fixed return

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DOK Level 2: Skill/Concept

What is the significance of the term "liquidity" in relation to savings accounts?

• It refers to the ability to quickly convert investments into cash without significant loss in value

• It indicates the level of risk in the stock market

• It describes the fixed interest rate of a CD

• It measures the performance of mutual funds

What is the purpose of a Certificate of Deposit (CD)?

• To provide a no-risk stock investment

• To allow unlimited withdrawals

• To lock in a fixed interest rate for a specified term

• To invest in mutual funds