PF - Unit 5 Test: Intro to Investing

Compounding increases your investment’s growth by ___ your earnings to gain additional ___

(a)   ​ (b)  

• reinvesting
• returns
• doubling
• rates
• principal

Historically, the value of the stock market has gone ​ (a)   and ​ (b)   a lot, but overall has ​ (c)   over time.

• up
• down
• increased
• stayed the same
• decreased

If you want to maximize your investment returns, which of these suggestions would be the BEST advice?

• Make frequent trades and withdraw your short-term earnings
• Start to invest early for the long-term
• Reinvest earnings
• Use diversification and allocation to minimize risk

How does a bond differ from a stock in your investment portfolio?

• Bonds typically have higher returns and lower risk than stocks
• Bonds typically have higher returns and higher risk than stocks
• Bonds typically have lower returns and higher risk than stocks
• Bonds typically have lower returns and lower risk than stocks

When it comes to investing in the stock market, which of the following statements is False?

• There is little to no risk to investing in the stock market
• It is easy to make money by timing the market to buy/sell stocks
• The whole stock market value can go up even if some stock values go down
• It is better to wait until retirement age to begin investing in the stock market

In 2018, Agatha set up a spreadsheet with a list of 10 stocks and 4 bond funds she’d just purchased for her investment portfolio. She recorded her purchase price per share and the number of shares she’d bought of each asset. She hasn’t bought or sold any shares since that day. She’s interested to know how much money she’d gain or lose if she sold all the shares today. What new data would she need in order to determine the return on investment for her entire portfolio?

• The price per share for each of her investments today
• The total returns of the US stock market over that same time frame
• The number of shares other investors have purchased over that same time frame
• The federal interest rate, minus inflation since the day she purchased the shares

What does it mean to have an investing portfolio that is diversified?

• Using a variety of sources to do research on what stocks to buy
• Making sure that your investments are different from those of your friends and family
• Investing in different assets to spread out the risk to different markets
• Never buying the same stock more than once

A dividend is ___

​ (a)   - (b)  

• a payment a bank
• a payment you

• makes periodically to stakeholders
• a payment a company

Which of the following is FALSE about investing?

• It is meant for short-term needs like your emergency fund, not saving for retirement
• It guarantees a high rate of return over a short period of time
• It can help you grow your money through the power of compounding
• It involves little risk because your returns are insured up to $250,000

Trevor has saved $500 in a savings account that earns 1.5% interest annually. What will most likely happen to the purchasing power of his savings over time?

• His purchasing power will DECREASE because the interest rate is lower than the historical rate of inflation
• His purchasing power will INCREASE because the interest rate is higher than the historical rate of inflation
• His purchasing power will INCREASE because the interest will compound faster than the historical rate of inflation
• His purchasing power will remain the SAME because the interest rate is the same as the historical rate of inflation