Types of Investments Flashcard Review

Front

What is a savings account primarily used for?

Back

Storing money safely while earning a little interest

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DOK Level 1: Recall

Front

Which type of savings account typically offers the highest interest rate? Options: Basic savings account, Checking account, Money market account

Back

Certificate of Deposit (CD)

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DOK Level 1: Recall

Front

What does it mean to buy a stock?

Back

Owning a portion of a company

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DOK Level 1: Recall

Front

What is the primary purpose of diversification in an investment portfolio?

Back

To reduce risk by spreading investments across various assets

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DOK Level 1: Recall

Front

Which of the following best describes the relationship between risk and return in investing? Higher risk guarantees higher returns, Lower risk guarantees higher returns, Higher risk generally involves the potential for higher returns, There is no relationship between risk and return

Back

Higher risk generally involves the potential for higher returns

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DOK Level 1: Recall

Front

What is the primary function of a stock market?

Back

To provide a platform for buying and selling stocks

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DOK Level 2: Skill/Concept

Front

Why is it important for an investor to understand their own risk tolerance?

Back

It helps in choosing the right types of investments that match their comfort with risk.

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DOK Level 2: Skill/Concept

Front

Why might an investor choose to invest in a mutual fund?

Back

To benefit from professional management and diversification

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DOK Level 2: Skill/Concept

Front

What is the significance of the term "liquidity" in relation to savings accounts?

Back

It refers to the ability to quickly convert investments into cash without significant loss in value

Front

What is the purpose of a Certificate of Deposit (CD)?

Back

To lock in a fixed interest rate for a specified term