What is the main difference between investing and trading?

Trading is more active than investing.

What is the main difference between an investor and a trader?

A trader buys and sells stocks more often than an investor.

What is compound interest?

Compound interest is when you get paid interest on the interest you earn.

Why is it better to start saving money early?

Because you will have more time for your money to grow.

What is the main reason why the person in the story is surprised by the results of the game?

They didn't understand how compound interest works.

What is a bull market?

A bull market is when the stock market is going up.

What is a bear market?

A bear market is when the stock market is going down.

What is the main reason why the bull and bear are considered opposites?

They have different opinions about the stock market.

What is the main difference between a bullish investor and a bearish investor?

A bullish investor is optimistic about the future, while a bearish investor is pessimistic.

What is the main reason why a company might issue stock?

To raise money without going into debt.

What is one way an investor can make money from owning stock? Options: By getting a job at the company., By selling the stock at a higher price than they bought it., By getting free products from the company., By getting a discount on the company's products.

By selling the stock at a higher price than they bought it.

Why are stocks considered riskier than other investments like bonds or CDs?

Stocks can go up or down in value.

What does it mean when a stock 'goes public'?

The company is listed on a stock exchange.

What is one way investors can try to minimize risk when investing in stocks? Options: Investing in only one company., Investing all of their money in stocks., Investing in a variety of companies., Investing in stocks that are very expensive.

Investing in a variety of companies.

What is the price-earnings ratio used for?

To compare the stock's price to its earnings

What does the 52-week high and 52-week low tell you about a stock?

The stock's trading range for the past year

What is a stock ticker symbol used for?

To identify the stock for buying or selling

What does the 'Open/High/Low' information tell you about a stock?

The stock's trading range for the day

What is the difference between a 'large-cap' stock and a 'small-cap' stock?

A large-cap stock is worth more than a small-cap stock.

What is the main reason why the city of Fairview issued bonds?

To build a new baseball stadium.

What is the main difference between investing in bonds and investing in stocks?

Bonds are less risky than stocks.

What is one risk that bond investors face?

The issuer might not pay back the money they borrowed.

What is the main reason that bonds are considered a more predictable investment than stocks?

Bonds offer regular payments and the return of the original investment.

What is the main reason why a bond might be worth less if sold before its maturity date? Options: The bond issuer might have gone bankrupt. The interest rate might have gone up. The bond might have been damaged. The bond might have been lost.

The interest rate might have gone up.

What is one way that investors can try to reduce the risk of investing in bonds? Options: Buying bonds from companies that are known to be financially stable. Buying bonds from companies that are known to be risky. Buying bonds from companies that are known to pay high interest rates. Buying bonds from companies that are known to be new.

Buying bonds from companies that are known to be financially stable.

What is the main reason why corporate bonds offer a higher yield than government bonds?

Corporate bonds are issued by companies that have a higher risk of defaulting.

What is the main difference between investment-grade corporate bonds and high-yield or junk bonds?

Investment-grade bonds are issued by companies that have a lower risk of defaulting.

What is the main reason why companies issue corporate bonds?

To raise money for their business.

What is the main difference between investment-grade corporate bonds and high-yield or junk bonds?

Investment-grade bonds are safer.

What is the main reason why governments issue bonds?

To pay for services without raising taxes.

What is the main reason why government bonds are considered safer than corporate bonds?

They are backed by the government.

What happens to the price of a bond when the yield goes up?

The price of the bond goes down.

What is the relationship between a bond's duration and its sensitivity to interest rate changes?

The longer the duration, the more sensitive the bond is to interest rate changes.

What is a good rule of thumb for choosing a bond fund's duration?

Choose a duration that is shorter than your investment time horizon.

Module 5: Investing and Saving Flashcard Flashcards

Student preview

87 questions

Show all answers

1.

FLASHCARD QUESTION

Front

What is the main difference between saving and investing?

Back

Saving is for short-term goals, while investing is for long-term goals.

2.

FLASHCARD QUESTION

Front

What is the biggest benefit of investing for a long time? Options: You can earn more money by taking more risks., You can get free money from the government., You can earn more money from compound interest., You can avoid paying taxes on your investments.

Back

You can earn more money from compound interest.

3.

FLASHCARD QUESTION

Front

Why is investing in stocks considered risky?

Back

Stocks can lose value if the company you invested in does poorly.

4.

FLASHCARD QUESTION

Front

What is the main reason why it is important to invest for a long time?

Back

You can earn more money from compound interest.

5.

FLASHCARD QUESTION

Front

What is one way to reduce risk when investing? Options: Investing in only one company., Investing in many different things., Investing in things that are very risky., Investing in things that are very safe.

Back

Investing in many different things.

6.

FLASHCARD QUESTION

Front

What is an example of a low-risk investment? Options: Buying stocks in a company., Putting money in a savings account., Investing in a new business., Buying a house.

Back

Putting money in a savings account.

7.

FLASHCARD QUESTION

Front

What is the relationship between risk and return in investing?

Back

The higher the risk, the higher the return.

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