Investing

Which best describes the difference between stocks and bonds?

• Stocks allow investors to share in profits; bonds make investors responsible for company debts.

• Stocks allow investors to own a portion of the company; bonds are loans to the company.

• Stocks pay interest to investors throughout the year; bonds only pay interest at fixed times during the year.

• Stocks are a more reliable investment; bonds ten to be more volatile.

When a _____ matures, you receive your entire investment back plus any remaining interest.

• Mutual Fund

• Bond

• Stock

• Index

Sometimes a ________ will pay you dividends.

• Bond

• Mutual Fund

• Index

• Stock

What is a possible reason a company would sell stock?

• To hire more people

• To expand its business

• To develop new technology

• All of the above

Investors nearing retirement will typically shift their investment portfolios to include _________ risk investments.

• Lower

• Moderate

• Higher

• None of the above -- when nearing retirement, investors typically move all their investments into savings accounts

What is the primary reason to issue stock?

• To help investors earn a higher rate of return

• To increase investor awareness of the company

• To distribute the risk of bankruptcy across more investors

• To raise money to grow the company

Which of the following correctly orders the investment from lower risk to higher risk?

• Treasury bond - Diversified mutual fund - Stock

• Stock - Treasury - Diversified mutual fund

• Treasury bond - Stock - Diversified mutual fund

• Diversified mutual fund - treasury bond -stock

When you buy a ______, you are loaning money to an organization.

• Index Fund

• Mutual Fund

• Bond

• Stock

How can investors receive compounding returns?

• By selecting a savings account that has a higher interest rate

• By diversifying their investment portfolio

• By transferring their earnings into a high-risk investment

• By investing their earnings back into their original investment

Diversification is important in investing because

• It increases your overall risk, which guarantees that you will make more money.

• It helps you to balance your risk across different types of investments.

• It ensures that you only make low-risk investments

• It helps you gain the highest rat of return despite any risks.