Investing Unit Final Review

Front

How does investing in the stock market differ from putting money in a savings account at a bank?

Back

Investing allows you to accumulate wealth for retirement while saving is best for short-term purchases or emergencies.

Front

Nancy is new to investing 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

Back

Pick individual stocks to see if she can beat the market

Front

Which of the following accurately describes a difference between an individual bond compared to a bond fund? A bond pays you dividends while a bond fund pays you regular interest, A bond guarantees you a higher rate of return than a bond fund, A bond is issued by a company while bond funds only invest in government bonds, A bond is considered to be a less diversified investment than a bond fund

Back

A bond is considered to be a less diversified investment than a bond fund

Front

Which of the following statements about Exchange Traded Funds (ETFs) is TRUE? ETFs are traded once a day after the market closes, An ETF is a single stock that you can buy in the stock market, Actively managed ETFs have very low fees, ETF prices can change throughout the day as they are exchanged on the market

Back

ETF prices can change throughout the day as they are exchanged on the market

Front

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 high risk asset, Investors expect to earn a higher return when they invest in a low risk asset, Investors expect to earn a higher return when they invest in a high risk asset, Investors expect to earn zero return when investing in a low risk asset

Back

Investors expect to earn a higher return when they invest in a high risk asset

Front

Why is diversification a recommended investment strategy?

Back

Diversifying your portfolio helps reduce risk

Front

How is a bond different from a stock?

Back

A bond is a loan you give to an organization while a stock is partial ownership in a company.

Front

How can someone make money from investing in a stock?

Back

They receive dividends or they sell the stock at a higher price than what they bought it for.

Front

What is a brokerage account used for?

Back

It’s a type of account used to buy and sell stocks, bonds, and funds.

Front

Why is it important for you to understand your risk tolerance before you start investing?

Back

You should tailor your investment portfolio so that it assumes an amount of risk you are comfortable with.