Savings and Investing Concepts Quiz

What is the main advantage of compound interest over simple interest in a savings account?

• It applies only to the initial deposit.

• It increases based on both the initial deposit and the accumulated interest.

• It earns less over time.

• It is unaffected by the frequency of compounding.

Which of the following types of accounts would likely earn the most interest in one year?

• Account with compound yearly interest

• Account with compound monthly interest

• Account with compound daily interest

• Account with simple yearly interest

What is a bond?

• An ownership share in a company

• A loan to a company or government that pays interest

• A type of mutual fund

• A guarantee of stock price increases

If you own a common stock in a company, what does this typically entitle you to?

• Guaranteed dividend payments

• Interest on your investment

• Voting rights in the company

• Ownership of a bond in the company

Which investment option typically provides the highest liquidity?

• Real estate property

• Certificates of Deposit (CDs)

• Savings accounts

• Mutual funds

Why might a company decide to pay dividends to its shareholders?

• To reinvest in the company

• To share a portion of its profits with shareholders

• To attract more employees

• To avoid paying taxes

A stock market index, like the S&P 500, is best described as:

• A government agency regulating the stock market

• A measure of the financial performance of a specific group of stocks

• A specific type of mutual fund

• An investment option guaranteed to grow annually

What is the Securities and Exchange Commission (SEC) responsible for?

• Setting interest rates for banks

• Creating savings account rules

• Enforcing regulations in the stock market

• Managing all retirement accounts

If you wanted to have a retirement account that allows for tax-free withdrawals during retirement, which account should you choose?

• Traditional IRA

• Roth IRA

• 401(k)

• Money Market Account

The term 'volatility' in the context of investments refers to:

• The liquidity of an asset

• The stability of an investment's value

• The degree to which an investment's value or return may fluctuate

• The time it takes for an investment to mature