Business Alg2 Second Practice Investing Quiz

Which of the following is NOT a stock index?

• DOW JONES

• S & P 500

• NASDAQ COMPOSITE

• P/E RATIO

A type of investment that invests in a lot of different companies is called

• Stocks

• Bonds

• Mutual funds

• T-bills

What is a stock?

• A loan an investor makes to a company or government that pays interest over time.

• A share of ownership in a company

• A collection of investments sold as a package.

• An option to purchase something in the future at todays price.

What is the primary reason for a company to issue stock?

• The stocks help investors earn a higher rate of return

• To raise money to grow the company

• To distribute the risk of bankruptcy across more investors

• To increase greater awareness of the company

If Jonathan is earning 2% on an investment and inflation is increasing by 3%, what is happening to his purchasing power?

• It's increasing

• It's decreasing

• It's not changing

• Inflation and purchasing power are not related

If interest rates rise, what will typically happen to bond prices?

• Rise

• Fall

• Stay the same

• Interest Rates are not related to bond prices

What's the main difference between a Roth IRA and a Traditional IRA?

• Roth IRAs have higher interest rates

• Roth IRAs have you pay taxes upfront

• Roth IRAs have higher fees

• Roth IRAs are riskier investments

Investors nearing retirement will typically shift their investment portfolios to include ________ risk investments.

• lower

• moderate

• higher

• None of the above

Which investment is the most risky?

• bond

• stock

• mutual fund

• savings account

Match the following types of investments with their explanation

• represents a fraction of the ownership of the issuing corporation

• Mutual Funds

• essentially loans to a corporation or governmental body

• Cash Alternatives

• allows you to invest in all three categories of investments with a smaller amount of money

• Stocks

• Includes savings accounts, money markets, CDs, guaranteed investment contracts, etc

• Bonds