8. Which of the statements below BEST describes the relationship between risk and return when considering an investment?

Investors expect to earn a higher return when they invest in a high risk asset like stock in a small company

Investors expect to earn a lower return when they invest in a risky asset

Investors expect to earn a higher return when they invest in a low risk asset, like a bond

Investors do not expect to earn a return on a high risk investment but rather expect to lose their money

9. Why is diversification a recommended investment strategy?

Diversifying your portfolio helps reduce risk.

Investing in a diversified portfolio guarantees that you won’t lose money with your investments.

If you tell your fund manager to use diversification, they’ll charge you lower fees.

If you diversify your portfolio, you are guaranteed to make a high return.

10. To open a brokerage account, you...

Must be able to transfer money from a checking or savings account.

Need to be over the age of 21 or you need a parent to open it for you.

Have to set an appointment with a brokerage firm as you can only open it in person.

Need proof that you have saved enough for an emergency fund first.

11. How is a bond different from a stock?

A bond is a loan you give to an organization while a stock is partial ownership in the company.

Bonds are typically riskier than stocks but have the potential to earn higher returns.

A bond is usually issued by smaller, startup companies while stocks are with well established organizations.

Bonds are best for earning high returns while stocks are best for providing a stable source of income.

12. An actively managed mutual fund…

Is managed by a fund manager who charges a fee

Generally has lower fees than an index fund

Always performs better than an index fund

Is a mix of two types of stocks and two types of bonds to diversify your portfolio

13. How can someone make money from investing in a stock?

They receive dividends from the company they bought the stock of and/or they sell the stock at a higher price than what they bought it for.

They sell the stock for a lower price than what they bought it for.

The stock loses value but the overall market experiences a positive return.

They sell the stock for the same price they bought it for.

14. What is a brokerage account used for?

It’s a type of account used to buy and sell stocks, bonds, and mutual funds.

It’s an online portal that allows you to set up appointments with a fund manager.

It’s the account you use to pay any taxes you owe on money you earned in your investments.

It’s a special type of 401(k) plan that only some employers offer.

15. Why is it important for you to understand YOUR risk tolerance before you start investing?

You should tailor your investment portfolio so that it assumes an amount of risk you are comfortable with.

It helps you decide if you want to participate in your employer’s match program for your 401(k).

It’s recommended that people with a low risk tolerance shouldn’t invest at all.

If you have a high risk tolerance, you may be eligible for lower fees since you won’t care if your portfolio drastically loses value.

16. Katrina works for Penny's Pickles, which offers a 401(k) match for up to 3% of her salary, which is $65,000 per year. In her budget, she only has $150 per month available to save for retirement. What should she do?

Contribute the full $150/mo to the 401(k) because her company will match that full amount, "doubling" her investment every month.

Opt out of the 401(k) plan since she doesn’t have much to contribute; use the money elsewhere in her budget.

Contribute $75/mo to her 401(k) and $75/mo to an IRA, so that she's diversified.

Save the $150/mo in a bank account until she has enough to max out her 401(k), and then invest.

17. A disadvantage of using a robo-adviser might be that…

You may not be able to get advice from a human financial advisor when you want it

You are charged higher fees than if a human fund manager adjusted your portfolio

You don’t have any input as to how your portfolio is invested

You’ll be put on a waitlist to use the robo-adviser since there are only a handful of them to choose from

18. Why are Target Date Funds (TDFs) becoming an increasingly popular option to invest in?

Target Date Funds automatically adjust the allocation between stocks and bonds as you age

Target Date Funds always perform better than the overall stock market

Target Date Funds don’t require you to have a brokerage account

Target Date Funds are tied to a social media account so that you can share updates with your networks

19. What is one question an investor should ask before investing in a Roth IRA or a Traditional IRA?

Do I want to pay taxes now (Roth IRA) or later (Traditional IRA)?

Do I want to make a guaranteed return of 6% or 8%?

Do I want to pay taxes now (Traditional IRA) or later (Roth IRA)?

What type of investments do I want to make?

20. Nancy is a beginner level investor and is eager to get started. All of the following are things she should do EXCEPT...

Pick individual stocks to see if she can beat the market

Invest in a low cost index fund

Estimate how much she will need for retirement to determine how much she needs to invest each month

Invest in a diversified portfolio

21. Elaine has been saving for a while and has $1,000 to invest. She would like this $1,000 to be the start of her retirement fund. What do you think is a good long-term investment strategy for Elaine?

Invest $800 in a stock index fund and $200 in a bond index fund

Invest $1,000 in a bond index fund

Invest in the stock of her favorite company

Invest her $1,000 in a regular savings account earning 0.05% interest since it is a safe investment

22. As a shareholder in a public company, what are the benefits available to you?

You may receive dividends from the company, if the company pays them, and you have ownership of a portion of a company

You must receive dividends from the company (all companies must pay them) and you can select members of the management team (e.g., the Chief Executive Officer (CEO))

You can select members of the management team [e.g., the Chief Executive Officer (CEO)] and vote for members of the Board of Directors

You have ownership of a portion of the company and receive coupon payments from the issuer

23. Why are Index Funds such a popular investing option?

They provide a low-cost, diversified investment option that closely matches the overall return of a given index, such as the S&P 500

They are a mix of 2-3 individual stocks that can help you diversify your portfolio

They are actively managed by a fund manager

They are managed by robo-advisors that guarantee higher returns than the overall stock market

24. What is a vesting period?

The period of time it takes for shares in an employer retirement plan to be owned fully by the employee

The period of time you have been investing for

The period of time you hold a stock before selling it

The period of time it takes a brokerage firm to complete a trade

25. Geraldo reviews his brokerage statement and sees the following two mutual fund investments that he made a year ago. ActiveFund20 had an average return (before fees) of 7% per year and an annual fee of 1%. PassiveFund500 had an average return (before fees) of 6.5% per year and an annual fee of 0.1%. Which investment had a better return for Geraldo (net of fees)?

PassiveFund500: It had an overall return of 6.4% while ActiveFund20 had an overall return of 6.0%

ActiveFund20: It had an overall return of 8.0% while PassiveFund500 had an overall return of 6.6%

PassiveFund500: It had an overall return of 6.6% while ActiveFund20 had an overall return of 8%

ActiveFund20: It had an overall return of 7.0% while PassiveFund500 had an overall return of 6.5%

2022-23 Investment Unit Review

Authored by Cautero Jennifer

Life Skills

9th - 12th Grade

Used 2+ times

AI Actions

Add similar questions

Adjust reading levels

Convert to real-world scenario

Translate activity

More...

Content View
Student View

25 questions

Show all answers

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

1. How does investing in the stock market differ from putting money in a savings account at a bank?

Investing is always a less risky option than saving

Investing is best for short-term situations like emergency funds; saving is best for the long-term

Investing typically earns between 1-2% while saving generally earns between 5-7%

Investing allows you to accumulate wealth for retirement while saving is best for short-term purchases or emergencies

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

2. Why is compound interest more advantageous than simple interest?

Compound interest is harder to calculate, so those who use it earn higher profits for their efforts

Compound interest means you have a fund manager who is compounding your returns without charging a fee

Compound interest allows you to earn interest not only on the amount you have saved, but also on the interest you've already earned

Compound interest has lower fees than simple interest

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

3. What kinds of cognitive biases and behaviors can prevent people from making smart investing decisions?

Staying calm when the market is experiencing a downturn.

Buying stocks when prices are low and selling them when they’re high

Exiting the market because that’s what everyone else is doing

Investing in a diversified portfolio instead of trying to time the market

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

4. Your friend Jenny wants to use a robo-adviser to manage her portfolio. What does this mean?

She'll have a human fund manager with advanced technology manage her portfolio.

A computer software system is going to adjust her portfolio based on her preferences.

Jenny will sit down for quarterly investment meetings with a robot.

Jenny can receive investing advice through an online chat service provided through the brokerage firm.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

5. When investing in individual stocks, you should expect that…

Stock prices for a company are relatively easy to predict

Unforeseen company events can have a dramatic impact on the stock price for a company

You will have an informational edge by reading an article about a company you want to invest in

Stock prices for an individual stock will be more stable over the long-term than prices for a diversified index fund

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

6. Which of the following statements about Exchange Traded Funds (ETFs) is TRUE?

ETFs are traded once a day after the market closes.

An ETF is a single stock that you can buy in the stock market.

Actively managed ETFs have very low fees.

ETF prices can change throughout the day as they are exchanged on the market.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

7. You bought 10 shares of stock in StreamingVideoCo for $45 per share. Two months later you sold the 10 shares of stock for $80 per share. What was your profit or loss on StreamingVideoCo stock? Assume that StreamingVideoCo didn't pay a dividend and that you didn't incur any trading fees during that period.

Loss of $800

Gain of $350

Loss of $450

Gain of $800

Access all questions and much more by creating a free account

Create resources

Host any resource

Get auto-graded reports

Continue with Google

Continue with Email

Continue with Microsoft

or continue with

Facebook

Apple

Others

By signing up, you agree to our Terms of Service & Privacy Policy

Already have an account?

Similar Resources on Wayground

20 questions

PRUEBA 2 - 5ºSEC.: LA MORFOLOGÍA DE LAS PALABRAS

Quiz

•

11th Grade

21 questions

Investing

Quiz

•

11th - 12th Grade

20 questions

Organización - 6to P.C I UNIDAD

Quiz

•

12th Grade

20 questions

Review Quiz 9

Quiz

•

9th Grade

20 questions

Cake Quiz

Quiz

•

9th - 12th Grade

20 questions

Workplace Safety Quiz

Quiz

•

12th Grade

20 questions

ENCUESTA DE AUTOESTIMA

Quiz

•

1st - 12th Grade

20 questions

CHOCOLATE

Quiz

•

7th Grade - University

Popular Resources on Wayground

10 questions

How much do you know about our Portrait of an Eagle?

Quiz

•

10th Grade

10 questions

Fast Food Slogans

Quiz

•

6th - 8th Grade

21 questions

Continents and Oceans

Quiz

•

6th Grade

20 questions

Parts of Speech

Quiz

•

5th Grade

16 questions

Subject & Predicate

Quiz

•

5th Grade

25 questions

Multiplication Facts

Quiz

•

5th Grade

12 questions

Map Skills

Quiz

•

3rd Grade

22 questions

Continents and Oceans

Quiz

•

5th Grade

Discover more resources for Life Skills

20 questions

Budgeting

Quiz

•

9th - 12th Grade

20 questions

Investing

Quiz

•

9th - 12th Grade

20 questions

Career

Quiz

•

9th - 12th Grade

20 questions

Kitchen Tools & Equipment

Quiz

•

8th - 12th Grade

20 questions

Taxes

Quiz

•

9th - 12th Grade

20 questions

Paying for College

Quiz

•

9th - 12th Grade

35 questions

Dave Ramsey Chapter 3 - Budgeting

Quiz

•

11th - 12th Grade

20 questions

Types of Credit

Quiz

•

9th - 12th Grade