Unit 4 investing

earning interest on previously earned interest plus the principal amount is known as...

• compounding

• dollar cost averaging

• stock

• savings account

spreading your money among different savings and investments is known as...

• compounding

• diversification

• savings account

• stock

a system where the public can buy or sell stock shares

• stock

• savings account

• stock exchange

• asset

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

The basic rule of a risk-to-return relationship is that...

• the lower the risk, the higher the return rate

• the higher the risk, the higher the return rate

• the higher the risk, the lower the return rate

• the two issues are not related

Which of the following types of investments potentially has the lowest investment risk while also growing in value?

• collectibles

• real estate

• savings account

• stocks

Which investment potentially has the highest risk and is most likely a higher rate of return?

• government bonds

• money market deposit account

• savings bonds

• stocks

The best time to start investing is after working on a job full time for at least five years.

• True

• False

Most wealthy people have gained their fortunes by winning the lottery or inheriting a large sum of money.

• True

• False

Savings is setting aside money to use later and investing is using money to buy something that will potentially make more money.

• True

• False