Financial literacy test

What is diversification in investing?

• a) Investing in a single company or sector to maximize returns

• b) Investing in multiple companies or sectors to minimize risk

• c) Investing in a single company or sector to minimize risk

What do we call the amount of money left over each month after you have paid all of your expenses?

• Surplus

• Straight cash homie

• Debt

• Diversification

What is compound interest?

• a) Interest that is only paid once per year

• b) Interest that is paid on both the principal and the interest earned

• c) Interest that is paid at a higher rate than simple interest

What is the difference between a stock and a bond?

• a) Stocks represent ownership in a company, while bonds represent debt

• b) Stocks represent debt in a company, while bonds represent ownership

• c) Stocks and bonds are the same thing

• d) None of the above

What is a budget?

• a) A plan for how to spend your money

• b) A plan for how to save your money

• c) A plan for how to invest your money

• d) None of the above

What is the difference between a stock and a mutual fund?

• a) Stocks are only traded on the stock market, while mutual funds are only traded in mutual fund companies

• b) Stocks represent ownership in a single company, while mutual funds invest in a variety of companies

• c) Stocks and mutual funds are the same thing

What is the difference between a budget and a financial plan?

• a) A budget is a short-term plan for managing your money, while a financial plan is a long-term plan for achieving your financial goals

• b) A budget is a long-term plan for achieving your financial goals, while a financial plan is a short-term plan for managing your money

• c) A budget and a financial plan are the same thing

What is the purpose of insurance?

• c) To earn a return on investment

• b) To protect against financial loss in the event of an accident or unexpected event

• a) To provide income in retirement

What is a mutual fund?

• An investment vehicle that pools money from multiple investors to invest in a variety of assets

• A loan that is backed by collateral

• A type of insurance policy

What is a dividend ?

• A type of loan that is paid back with interest

• A issue of new shares

• A payment made by a company to its shareholders, usually in the form of cash or additional shares