Investing Final Review

What is the primary reason for a company to issue stock?

• The stocks help investors earn a higher rate of return

• To raise money to grow the company

• To distribute the risk of bankruptcy across more investors

• To increase greater awareness of the company

Professionally managed, diversified investment that pools resources of many investors

• Treasury bonds

• Stock index

• Mutual fund

• Saving account

Spreading your investments around to inrease financial security

• Risk assessment

• Diversification

• Stocks, bonds & cash

• Liquidity trap

Which of the following is NOT a stock index?

• DOW JONES

• S & P 500

• NASDAQ COMPOSITE

• P/E RATIO

What is a stock?

• A loan an investor makes to a company or government that pays interest over time.

• A share of ownership in a company

• A collection of investments sold as a package.

• An option to purchase something in the future at todays price.

Ownership in a publicly traded corporation

• CD-certificate of deposit

• Money Market

• Treasury bill

• Stock

Why is compound interest more beneficial than simple interest? (hint: choose 2 correct answers)

• Your money grows faster when it is compounded

• You earn interest on your interest

• Fees for compound interest are greater than simple interest

• Compound interest is hard to calculate, so fewer use it

A key difference between saving and investing is

• Saving is for everyone, investing is for the wealthy

• Your money is insured when investing, it is not in savings

• Investing has a guaranteed return, savings does not

• Saving is for emergencies & goals, investing is for long-term wealth

Which would be considered the highest risk investment type?

• Stock

• Mutual Fund

• Bond

• Money Market Account

The relationship between risk and return can be stated as

• Higher risk indicates higher return

• Higher risk indicates lower return

• Lower risk indicates higher return

• No relationship exists between risk and return