Module 4 Investment Quiz

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

• Compounding increases investments over time.

• Investments increase in risk over time.

• Take time to “pay yourself first.”

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

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.

. Kyle isn’t willing to take much risk with his money as he sets money aside to use when he buys a car next year. Which one of the following types of investments potentially has the lowest investment risk while also growing in value? [

• collectibles

• real estate

• savings account

• stocks

Kendra just received a promotion with a nice raise. She has her spending plan under control, so she decides to adjust her long-range investing plan now that she can take on more investment risk. Which one of the following types of investments potentially has the highest risk and is most likely a higher rate of return for Kendra?

• government bonds

• money market deposit account

• savings bonds

• stocks

Which one of the follow is not an example of investing?

• buying a business to open an ice cream shop

• buying a car to get to work

• buying rental property

• buying a tow truck with a blade to start a towing and snow removal service

Three steps to build wealth include

1) Have enough income to invest

2) Make a plan

3) Put money to work by investing.

• true

• false

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

• true

• false

Setting aside money to use later ...

• investing

• saving

• compounding

• diversifying

Using money to buy something that will potentially make more money ...

• investing

• saving

• compounding

• diversifying

Earning interest on previously earned interest plus the principal amount ...

• investing

• saving

• compounding

• diversifying