Investments

When purchasing stock, a person should be aware that:

• Once a person buys the stock, he must hold that stock until retirement

• There is no guarantee that the price of the stock will go up

• The Securities and Exchange Commission (SEC) charges stockholders an annual fee based on the number of shares of stock he owns

• Buying shares of stock in different companies rather than in one company increases risk

What is a good strategy to build wealth for the future?

• Pay for goods and services using credit cards

• Pay bills when received and use a checking account

• Deposit money into both savings and investment accounts each month

• Have paychecks automatically deposited into a checking account

Which financial advisor is recommending a long-term investment that lowers investment risk?

• Advisor A: “Purchase a used car”

• Advisor B “Purchase a computer”

• Advisor C “Invest in mutual funds”

• Advisor D “Invest in speculative stocks”

It is usually a good idea to borrow for

• Something that increases in value over time

• The amount needed to pay bills each month

• Anything that will make the person happy

• Anything, if the interest rate is low

A person investing 3% of a $31,000 salary each year in a 401(k) starting at age 25 will have much more money at age 70 than someone who waited until age 50 to invest 3% each year of a $55,000 salary. Why is this true?

• Because of inflation, the money will be worth more at retirement

• The interest rate earned by a 25 year old is greater than the interest rate earned by a 50 year old

• Investments provided to a 25 year old are better than those provided to a 50 year old

• The invested money has had a longer period of time to benefit from compounding and investment gains

The reason corporations issue bonds is to

• Encourage Americans to save

• Increase their employees salaries

• Borrow money from investors

• Increase the number of their customers

Why do investors buy stocks that pay dividends?

• The stock price will not change

• The price is generally lower

• Investors are allowed to buy company products at a discount

• Investors receive payments from the company during the year

When the stock market has been rising and investors are confident, expecting stock prices to continue rising, it is described as a

• Bear Market

• Bull Market

• Puppy Market

• Stable Market

A public corporation announced today that it lost a major lawsuit. As a result, it is most likely that the

• Price of their stock will increase

• Price of their stock will decrease

• Corporation will issue more stock

• Corporation will expand its business

Who suffers the LEAST when the rate of inflation increases?

• People who buy goods and services with credit cards

• People who have a loan with a fixed-interest rate

• People who need to borrow money

• People who are unemployed