Unit 13 - Investing Review

What is a bond?

• A loan that you give to an organization

• Ownership in an organization

• Risky investments

• High-return investments

Which of the following best describes an investment?

• An owned asset

• An owned asset that increases in value, but that the owner never intends to sell

• An asset purchased with the hope it will generate income or appreciate in value

• An owned asset that the owner can sell in the future

If an investment is liquid, it cannot turn into cash quickly.

• True

• False

If a person has equity in a company because he bought stocks in it, he actually owns a portion of that company.

• True

• False

Investing allows you to _____ while saving is best for ____.

• Accumulate wealth; short-term purchases and emergencies

• Short-term purchases and emergencies; accumulate wealth

• Get money no matter what; long-term investments

• Earn between 1-2%; earning between 5-7%

What is a stock?

• A loan that you give to an organization

• Ownership in an organization

• Safest investment

• Low-return investment

What is Diversification?

• Creates portfolios that include multiple investments in order to reduce risk

• Balances risk and reward by dividing assets

• Combines investment money from multiple people to invest

• Focuses on investments that pay a fixed rate of return

The primary reason for diversifying an investment portfolio is to protect against ________.

• Unexpected changes in the market

• Identity theft

• Total loss

• Undervalued stock prices

Which of the following statements about Mutual Funds is TRUE?

• An advantage of investing in mutual funds is that you don't have to pick individual stocks and bonds.

• Mutual funds that are actively managed by a fund manager are trying to "beat the market" averages.

• Mutual fund managers typically charge fees of 1 - 2% on the assets they manage.

• All of these are correct

What is an Index Fund?

• Combines investment money from multiple people in order to invest in a diversified portfolio

• Invests in stocks that corresponds to a major market index

• Focuses on investments that pay a fixed rate of return

• Focuses on low-risk, low-return, highly liquid investments