Module 4 Investing Review

A type of income investment

• Savings Account

• Asset

• Windfall

• Car

A type of growth investment

• Windfall

• Asset

• Savings Account

• Stock

Earning interest on previously earned interest plus the principal amount

• Asset

• Compounding

• Diversification

• Dollar Cost Averaging

Spreading your money among different savings and investments

• Diversification

• Dollar Cost Averaging

• Rate of Return

• Windfall

A system where the public can buy or sell stock shares

• Rate of Return

• Dollar Cost Averaging

• Stock Exchange

• Windfall

The time value of money can best be explained using which one of the following concepts?

• A dollar today is worth more than a dollar tomorrow.

• Take time to “pay yourself first.”

• Investments increase in risk over time.

• Compounding increases investments over time.

Alexis has money saved and invested several ways with a goal to grow her money at a rate higher than inflation. What is the historical long-term annual average rate of inflation?

• 1%

• 3%

• 5%

• 7%

As Alexis decides how to invest her money, which one of the following options is most likely to grow at a rate higher than inflation?

• real estate

• U.S. savings bond

• savings account

• mutual fund

Moira starts a mutual fund with $500 and adds $500 to her mutual fund every year for another nine years. Roland decides to wait 10 years so he can save up a lump sum of $5,000 to invest at one time in a mutual fund. If both Moira and Roland earn on average of 7 percent APY, who will have the larger mutual fund balance in 20 years?

• Roland

• Moira

• They will have the same balance amount because they each invested the same amount at the same rate.

• There is not enough information presented to make a prediction.

Given the same principal amount and interest of 1.3 percent APY for all options below, which option will earn the most interest over three years?

• savings bond that has interest compounded twice a year

• savings account that earns interest compounded quarterly

• certificate of deposit that has interest compounded daily

• All of the above will earn the same amount of interest.