Investing

Select the best definition of compound interest.

• Compound interest is earning interest on the original amount you deposited

• Compound interest is earning interest on the original amount you deposited plus any interest earned

• Compound interest is the amount of interest you are charged on your bank account each month

• Compound interest is earning a fixed dollar amount on your bank account each month

What is the current trading price of McDonald's stock?

• $188.50

• $186.75

• $24.43

• $1.75

What is the difference between simple and compound interest?

• Simple interest is always higher than compound interest.
• Simple interest is calculated on the principal only; compound interest is calculated on the principal plus accumulated interest.
• Compound interest is calculated only on the principal amount.
• Simple interest can be compounded over time.

What is a stock?

• A stock is a share of ownership in a company.

• A stock is a lending investment to the government or a company.

• A stock is an insured bank account with high risk.

• A stock is a type of investment that uses money from investors to purchase many different investment types.

Which statement best describes how diversification impacts risk when you are investing?

• Diversification means spreading your money across multiple investments, which decreases risk.

• Diversification means spreading your money across multiple investments, which increases risk.

• Diversification means putting all of your money into one investment, which decreases risk.

• Diversification means putting all of your money into one investment, which increases risk.

Mariam is young, willing to take a moderate amount of risk, but most importantly, wants an investment that is low-cost and diversified. Which is the best investment type for Mariam?

• A bond

• An individual stock

• A savings account

• An index fund

Your friend Jamal is 14 and wants to begin investing. He has taxable income from working at his uncle's sporting goods store. What type of account would you advise him to open?

• A traditional savings account

• A custodial brokerage account

• A custodial Roth IRA

• A 401k

Why is it important for you to understand YOUR risk tolerance before you start investing?

• It is recommended that people with a low risk tolerance shouldn't invest at all.

• If you have a high risk tolerance, you will likely pay less in investment fees.

• You should create an investment portfolio that includes an amount of risk you are comfortable with.

• You must be willing to take a high amount of risk to begin investing.

What is the best investing strategy?

• Buy low, sell low

• Buy high, sell high

• Buy low, sell high

What is one requirement to open a Custodial IRA account?

• You must be 18 years old.

• You must also open a savings & checking account.

• You must have a valid driver's license.

• You must have taxable income or wages.