Unit 3 Review PF

According to the graph, which investment option offers the lowest risk and lowest potential return?

• Stocks

• Savings Accounts

• Bond-Based Mutual Funds

• Stock-Based Mutual Funds

Which combination would provide the most balanced investment portfolio?

• Stocks and stock-based mutual funds

• Bonds and bond-based mutual funds

• Certificates of deposit and savings accounts

• Stocks, bonds, and certificates of deposit

Which of the following investment options typically offers the greatest potential for high returns along with significant risk?

• Government bonds

• Common stock

• Certificates of deposit

• Municipal bonds

What is the general relationship between risk and potential return in investing?

• Higher risk usually means higher potential return.

• Lower risk always guarantees higher return.

• Higher risk always means lower return.

• Risk and return are not related in investing.

Which of the following is LEAST LIKELY to be considered a long-term investment option for retirement planning?

• Stocks

• 401(k) plans

• Certificates of deposit (CDs)

• Regular savings account

Which of the following is MOST LIKELY to provide tax advantages for retirement savings?

• Certificate of deposit

• 401(k) plan

• Savings account

• Money market account

What is one advantage of choosing an IRA (Individual Retirement Account) for retirement savings instead of directly purchasing stocks?

• IRAs always provide higher returns than stocks.

• IRAs eliminate all investment risks.

• IRAs may offer tax benefits that stocks do not.

• Stocks are only available to high-income individuals.

Susan is planning to retire in 7 years and wants to protect her savings from major losses. Which investment option would be the MOST RISKY for her to invest in at this stage?

• Bonds

• Stocks

• mutual funds

• Certificates of deposit

Which statement best explains the primary distinction between stocks and bonds as investment options?

• Stocks represent a share of ownership in a company, while bonds represent a debt owed by the company.

• Bonds pay profits, and stocks pay fixed interest.

• Stocks are considered liabilities, while bonds are considered assets.

• Bonds are traded on stock exchanges, but stocks are not.

What happens to the investor when a bond matures?

• The investor must pay additional fees to the issuer.

• The investor receives the face value and any remaining interest payments.

• The investor is required to reinvest the bond automatically.

• The investor loses all rights to the bond's value.