Investment Basics

Why is compound interest more advantageous than simple interest?

• It’s more difficult to calculate, so fewer people use compound interest, making more profits for those who do.
• Compound interest accumulates very rapidly, so you only have to save for 3 years or fewer to earn far more money.
• Compound interest is attached to the stocks with the highest risk, so you get the highest interest on them
• In compound interest, you earn interest on not only your principal, but also on the interest you’ve already made.

Rule of 72:  How many years to double my money if I get a 9% return on investment? 

• 8 years
• 7.2 year
• 7 years
• 9 years

When you buy a stock, you are buying a small piece of _______ in a company.

• debt
• ownership
• risk

The Rule of 72 is used to find how long an it will take for

• investments to double
• debt to double
• interest to increase

Why do companies issue stocks?

• To create and investment opportunity into other businesses.
• To increase employee cooperation 
• To be traded individually
• To raise money for economic investment

What is an IPO?

• Initial Polling Office
• Initial Public Offering
• International Public Office
• Increasing Public Opportunity

The chance of loss.

• Stock
• Reward
• Risk
• Real Estate

Justin wants to go to spend a month traveling Europe next summer but doesn’t have the money to do so. He’s thinking of investing the $700 he currently has saved in stock in his favorite restaurant in hopes of earning the money for the vacation. Why shouldn’t he do that?

• Investing in one company’s stock is quite risky.
• Investing your whole savings in the stock market is a bad financial move.
• One year probably isn’t enough time for one stock to turn $700 into a month’s vacation.
• All of the above

Which of the following statements are true?

• Between cash, stocks, and bonds, bonds are typically considered the riskiest.
• Stocks are the riskiest investments out there.
• Putting money into a savings account with interest is the ideal way for a young adult to invest.
• Historically, stocks have had far greater annual returns than cash, government bonds, and savings

Your risk tolerance for investing should be determined by these two factors:

• Your stocks and bonds
• Your time horizon and when you will need access to the money
• Your debits and credits
• Your education level and ethnicity