1. ________ are typically comprised of a mix of ________ and ________. |
c. Mutual funds; stocks; bonds |
2. If an investment is considered "volatile", it means… |
b. the value of the investment may be hard to predict. |
3. Why might a town decide to issue bonds? |
b. To build new roads or bridges. |
4. Diversification is important in investing because… |
a. It helps you to balance your risk across different types of investments. |
5. Why is a high-quality bond typically considered a lower-risk investment than a stock? |
a. A bond typically pays a fixed, predictable amount of interest each year. |
6. Which of the following would be considered the highest risk portfolio? |
c. A portfolio made up of 60% stocks, 30% mutual funds, and 10% Treasury bonds. |
7. Which investment type typically carries the least risk? |
c. Savings Accounts |
8. Which of the following is generally true about 401(k) and 403(b) retirement plans? |
d. All of the above |
9. When might be the best time to start saving for retirement? |
c. At the earliest possible date. |
10. How can investors receive compounding returns? |
b. By investing their earnings back into their original investment |
11. What are dividends? |
c. A distribution of a small percentage of profits to shareholders. |
12. When you buy a ____ , you are loaning money to an organization. |
b. Bond |
13. What happens when a bond becomes due? |
b. The issuer will pay you back, plus interest. |
14. Which best describes the difference between stocks and bonds? |
b. Stocks allow investors to own a portion of the company; bonds are loans to the company. |
15. Generally speaking, the _______ the risk, the _______ the potential return or loss. |
b. higher; higher |
16. What is the primary reason to issue stock? |
b. To raise money to grow the company |
17. Which type of portfolio might a young investor who is not afraid of risk choose? |
a. A portfolio of with a high percentage of stocks. |
18. When it comes to investing, what is the typical relationship between risk and return? |
b. The greater the potential risk, the greater the potential return. |
19. If an employer does not offer a retirement plan, what might be another way to save for retirement? |
d. Both A and B |
20. Which of the following correctly orders the investments from LOWER risk to HIGHER |
c. Treasury bond − Diversified mutual fund – Stock |
Economics Investing Test Module 9
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