Investing Quiz

Which is the best definition of investing?

• putting aside money for a 'rainy day'

• putting aside money for an emergency

• putting aside money for a future purchase

• putting aside money to make more money

What is true about using margin to buy stock?

• You are insured against losing your principal.

• You are increasing the risk of your investment.

• You are improving the liquidity of your investment.

• You are gaining professional management of your money.

Which refers to the rate of return after taking into consideration inflation?

• real rate of return

• return on investment

• annual rate of return

• yearly rate of return

Kelly buys $2000 worth of shares in a mutual fund. Three years later she sells her shares for $2600. What is her return on investment (ROI)?

• 15%

• 20%

• 30%

• 50%

Which investment has both the highest potential risk and the highest potential reward?

• common stocks

• municipal bonds

• certificates of deposit

• U.S. government bonds

How can a person invest in real estate without buying property and becoming a landlord?

• purchasing shares of common stocks

• purchasing shares of preferred stocks

• purchasing shares of an actively managed fund

• purchasing shares of a real-estate investment trust

Which of the following is a characteristic of a preferred stock?

• is a type of loan to the company

• pays a dividend but has no voting rights

• represents ownership but cannot pay a dividend

• gets priority voting rights but does not represent ownership

How can both stocks and bonds generate a positive return for investors?

• paying dividends

• paying interest

Which is true of investing in United States government bonds?

• They pay quarterly dividends.

• They are considered very risky.

• They represent an ownership share.

• They are considered a safe investment.

Which is not a characteristic of exchange traded stock funds?

• minimal risk

• easily redeemed

• professionally managed

• trades on a stock exchange