Fundamentals of Investing

Front

What is the most correct description of liquidity?

Back

How quickly and easily an asset can be converted into cash

Front

When taking advantage of the time value of money, which of the following is most likely to result in the largest return?
- Invest a large principal amount of money and then make no additional investments
- Invest as long as possible and at the highest interest rate possible
- Invest a small amount of money for a short period of time at the highest interest rate possible
- Invest at a high interest rate because interest is the only factor that affects return

Back

Invest as long as possible and at the highest interest rate possible

Front

What is the best statement to explain compounding interest?

Back

Earning interest on interest.

Front

Which statement best reflects the philosophy of “pay yourself first”? Options: An individual should save whatever money is left over after paying monthly bills, An individual should pay all fixed expenses before paying flexible expenses, An individual should set aside a predetermined amount of money for saving before using any money for spending, An individual should spend money on the items and activities enjoyed in life before paying any other expenses

Back

An individual should set aside a predetermined amount of money for saving before using any money for spending

Front

Which of the following is a feature of a certificate of deposit (CD)?
Options:
Funds deposited in a CD are held for a certain length of time
Funds deposited in a CD have tiered interest rates
Funds deposited in a CD are very liquid
Funds deposited in a CD can be accessed via check or debit card

Back

Funds deposited in a CD are held for a certain length of time

Front

Which statement best describes inflation?

Back

The rise in the general level of prices

Front

The most common relationship between risk and return in investing can be stated as:

Back

higher risk indicates higher return.

Front

A diversified portfolio is desirable because it:

Back

decreases risk by investing money in a variety of investment tools.

Front

Which of the following is not true in regards to investing in stock? A stockholder owns a part of a company, Depending upon the current market price, stockholders may pay different prices for the same stock, A stockholder may or may not receive a dividend, A stockholder will always receive a profit when the stock is sold

Back

A stockholder will always receive a profit when the stock is sold

Front

Conner wants to purchase stocks with the money he received from his tax return. Who would he contact to make the transaction?

Back

A brokerage firm