Have an account?
Skip to Content
Build your own quiz
38 questions
Show Answers
See Preview
- 1. Multiple Choice
How does investing in the stock market differ from putting money in a savings account at a bank?
Investing is always a less risky option than saving
Investing is best for short-term situations like emergency funds; saving is best for the long-term
Investing typically earns between 1-2% while saving generally earns between 5-7%
Investing allows you to accumulate wealth for retirement while saving is best for short-term purchases or emergencies
- 2. Multiple Choice
Why is compound interest more advantageous than simple interest?
Compound interest is harder to calculate, so those who use it earn higher profits for their efforts
Compound interest means you have a fund manager who is compounding your returns without charging a fee
Compound interest allows you to earn interest not only on the amount you have saved, but also on the interest you've already earned
Compound interest has lower fees than simple interest
- 3. Multiple Choice
What kinds of cognitive biases and behaviors can prevent people from making smart investing decisions?
Staying calm when the market is experiencing a downturn.
Buying stocks when prices are low and selling them when they’re high
Exiting the market because that’s what everyone else is doing
Investing in a diversified portfolio instead of trying to time the market
- 4. Multiple Choice
When investing in individual stocks, you should expect that…
Stock prices for a company are relatively easy to predict
Unforeseen company events can have a dramatic impact on the stock price for a company
You will have an informational edge by reading an article about a company you want to invest in
Stock prices for an individual stock will be more stable over the long-term than prices for a diversified index fund
- 5. Multiple Choice
You bought 10 shares of stock in PBHSBusinessCo for $30 per share. Two months later you sold the 10 shares of stock for $65 per share. What was your profit or loss on PBHSBusinessCo stock? Assume that PBHSBusinessCo didn't pay a dividend and that you didn't incur any trading fees during that period.
Loss of $800
Gain of $350
Loss of $450
Gain of $800
- 6. Multiple Choice
Which of the statements below BEST describes the relationship between risk and return when considering an investment?
Investors expect to earn a lower return when they invest in a risky asset
Investors expect to earn a higher return when they invest in a low risk asset, like a bond
Investors expect to earn a higher return when they invest in a high risk asset like stock in a small company
Investors do not expect to earn a return on a high risk investment but rather expect to lose their money
- 7. Multiple Choice
Why is diversification a recommended investment strategy?
Investing in a diversified portfolio guarantees that you won’t lose money with your investments.
If you tell your fund manager to use diversification, they’ll charge you lower fees.
Diversifying your portfolio helps reduce risk.
If you diversify your portfolio, you are guaranteed to make a high return.
- 8. Multiple Choice
How is a bond different from a stock?
A bond is a loan you give to an organization while a stock is partial ownership in the company.
Bonds are typically riskier than stocks but have the potential to earn higher returns.
A bond is usually issued by smaller, startup companies while stocks are with well established organizations.
Bonds are best for earning high returns while stocks are best for providing a stable source of income.
- 9. Multiple Choice
An actively managed mutual fund…
Generally has lower fees than an index fund
Is managed by a fund manager who charges a fee
Always performs better than an index fund
Is a mix of two types of stocks and two types of bonds to diversify your portfolio
- 10. Multiple Choice
How can someone make money from investing in a stock?
They sell the stock for a lower price than what they bought it for.
They receive dividends from the company they bought the stock of and/or they sell the stock at a higher price than what they bought it for.
The stock loses value but the overall market experiences a positive return.
They sell the stock for the same price they bought it for.
- 11. Multiple Choice
What is a brokerage account used for?
It’s an online portal that allows you to set up appointments with a fund manager.
It’s the account you use to pay any taxes you owe on money you earned in your investments.
It’s a type of account used to buy and sell stocks, bonds, and mutual funds.
It’s a special type of 401(k) plan that only some employers offer.
- 12. Multiple Choice
Why is it important for you to understand YOUR risk tolerance before you start investing?
It helps you decide if you want to participate in your employer’s match program for your 401(k).
It’s recommended that people with a low risk tolerance shouldn’t invest at all.
If you have a high risk tolerance, you may be eligible for lower fees since you won’t care if your portfolio drastically loses value.
You should tailor your investment portfolio so that it assumes an amount of risk you are comfortable with.
- 13. Multiple Choice
Zara works for Lunch On The Go, which offers a 401(k) match for up to 3% of her salary, which is $65,000 per year. In her budget, she only has $150 per month available to save for retirement. What should she do?
Opt out of the 401(k) plan since she doesn’t have much to contribute; use the money elsewhere in her budget.
Contribute $75/mo to her 401(k) and $75/mo to an IRA, so that she's diversified.
Save the $150/mo in a bank account until she has enough to max out her 401(k), and then invest.
Contribute the full $150/mo to the 401(k) because her company will match that full amount, "doubling" her investment every month.
- 14. Multiple Choice
Jamie is a beginner level investor and is eager to get started. All of the following are things she should do EXCEPT...
Invest in a low cost index fund
Estimate how much she will need for retirement to determine how much she needs to invest each month
Pick individual stocks to see if she can beat the market
Invest in a diversified portfolio
- 15. Multiple Choice
Chloe has been saving for a while and has $1,000 to invest. She would like this $1,000 to be the start of her retirement fund. What do you think is a good long-term investment strategy for Chloe?
Invest $800 in a stock index fund and $200 in a bond index fund
Invest $1,000 in a bond index fund
Invest in the stock of her favorite company
Invest her $1,000 in a regular savings account earning 0.05% interest since it is a safe investment
- 16. Multiple Choice
As a shareholder in a public company, what are the benefits available to you?
You may receive dividends from the company, if the company pays them, and you have ownership of a portion of a company
You must receive dividends from the company (all companies must pay them) and you can select members of the management team (e.g., the Chief Executive Officer (CEO))
You can select members of the management team [e.g., the Chief Executive Officer (CEO)] and vote for members of the Board of Directors
You have ownership of a portion of the company and receive coupon payments from the issuer
- 17. Multiple Choice
Why are Index Funds such a popular investing option?
They are a mix of 2-3 individual stocks that can help you diversify your portfolio
They provide a low-cost, diversified investment option that closely matches the overall return of a given index, such as the S&P 500
They are actively managed by a fund manager
They are managed by robo-advisors that guarantee higher returns than the overall stock market
- 18. Multiple Choice
What is a vesting period?
The period of time it takes for shares in an employer retirement plan to be owned fully by the employee
The period of time you have been investing for
The period of time you hold a stock before selling it
The period of time it takes a brokerage firm to complete a trade
- 19. Multiple Choice
Owen reviews his brokerage statement and sees the following two mutual fund investments that he made a year ago. ActiveFund20 had an average return (before fees) of 7% per year and an annual fee of 1%. PassiveFund500 had an average return (before fees) of 6.5% per year and an annual fee of 0.1%. Which investment had a better return for Owen (net of fees)?
ActiveFund20: It had an overall return of 8.0% while PassiveFund500 had an overall return of 6.6%
PassiveFund500: It had an overall return of 6.6% while ActiveFund20 had an overall return of 8%
ActiveFund20: It had an overall return of 7.0% while PassiveFund500 had an overall return of 6.5%
PassiveFund500: It had an overall return of 6.4% while ActiveFund20 had an overall return of 6.0%
- 20. Multiple Choice
A share of ownership in a company
stock
bonds
mutual funds
speculative investments
- 21. Multiple Choice
a form of lending to a company or the government
stock
bonds
index fund
speculative investments
- 22. Multiple Choice
when a company combines the funds of many different invetors then invests that money in a diversified portfolio of stocks and bonds
stocks
bonds
mutual funds
real estate
- 23. Multiple Choice
a mutual fund that was designed to reduce fees by investing in the stocks and bonds that make up an index
stock
bond
mutual funds
index funds
- 24. Multiple Choice
ownership of residential or commercial property or land
stock
bonds
real estate
speculative investments
- 25. Multiple Choice
futures, options, collectibles
stock
bonds
real estate
speculative investments
- 26. Multiple Choice
the possibility that an investment will fail to pay the expected return or fail to pay a return at all
investment risk
inflation
risk
inflation risk
- 27. Multiple Choice
the rise in the general level of prices
investment risk
inflation
risk
inflation risk
- 28. Multiple Choice
the uncertainty regarding the outcome of a situation of event.
investment risk
inflation
risk
inflation risk
- 29. Multiple Choice
the danger that money won't be worth as much in the future as it is today.
investment risk
inflation
risk
inflation risk
- 30. Multiple Choice
An example of how the purpose of investing is different than the purpose of saving?
investments help build net work
investments are assets purchased with a goal of increasing value or providing additional income
investments are usually used to pay for long term goals
all of these
- 31. Multiple Choice
Investments ranked from lowest risk to highest risk.
bonds, stock and real estate, speculative, mutual fund and index fund
bonds, mutual fund and index fund, stock and real estate, speculative
mutual fund and index fund, stock and real estate, bonds, speculative
stock and real estate, speculative, bonds, mutual fund and index fund
- 32. Multiple Choice
When focusing on wealth accumulation, the rate of return earned on an investment should be higher than the rate of inflation.
True
False
- 33. Multiple Choice
Taxes must be paid on ALL investment profits in the year the unearned income is received.
True
False
- 34. Multiple Choice
An individual's investment philosophy changes throughout their lifetime.
True
False
- 35. Multiple Choice
Individuals with an aggressive investment philosophy are not willing to take on risk for the potential of higher returns.
True
False
- 36. Multiple Choice
Portfolio diversification is a method that helps an individual receive the highest return on investments.
True
False
- 37. Multiple Choice
In order to buy and sell investments (except for real estate and certain speculative investments), an individual needs to utilize a brokerage firm.
True
Fakse
- 38. Multiple Choice
A full service general brokerage firm usually charges lower commission fees than a discount broker.
True
Fakse
- Answer choicesTagsAnswer choicesTags