Risk VS Return

True or False: Corporate bonds generate higher rates of return than U.S. Treasury bonds.

• True

• False

Someone who can tolerate a risky investment would:

• Wake up in the middle of the night worrying about the investment

• Be very concerned that a downturn would wipe out the long-term gains

• Understand that an investment that fell when the entire market fell was not necessarily a bad investmen

• Keep all money in a savings account at a bank for long-term growth

Bond funds:

• Will lose all value if a single bond defaults

• Are investment bargains because their price is so low

• Are riskier than owning individual corporate bonds

• Spread the risk of individual bonds by collectively owning more and less-risky bonds, with higher and lower rates of return

The Dow Jones Industrial Average is a collection of:

• Thirty U.S. stocks

• Thirty municipal bonds

• Thirty globally diverse stocks

If you created a graph with investment risk on the x-axis and investment return on the y-axis and plotted points for two different investments, a line going through the points would probably be:

• Positively sloped

• Negatively sloped

• Have a slope of zero

If you have a long-time horizon for investing, you should:

• Lean toward high-risk investments with high-return potential

• Keep at least 75% cash or money market funds for immediate availability

• Own only one stock

• Diversify into savings accounts and U.S. savings bonds

Investing in a global stock fund is a good idea to:

• Focus all risk on the U.S. economy

• Keep your portfolio dependent solely on the U.S. dollar

• Diversify into municipal and corporate bonds

• Diversify holdings to spread risk outside the U.S. economy

Starting an investment portfolio at a young age means:

• Knowing your investment is always safe

• You can spend freely, without concern for your financial future

• There is greater potential for high yield over a longer period

• You should choose stock with low risks

Mutual funds can be:

• Purchased in any amount

• Can be focused on a single asset class

• Invested by sector

• All the above

What is the value of a $1,000 investment that loses 5% each year for 8 years?

• $181.98

• $234.88

• $663.42

• $864.62