Exam Review (Investing) - 2024
Authored by Mark Caza
Financial Education
12th Grade
Used 1+ times
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27 questions
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1.
MULTIPLE CHOICE QUESTION
15 mins • 1 pt
Which of the following is TRUE, based on the historic returns of the S&P 500?
The stock market fluctuates in the short term and is difficult to predict. It has an average annual return of 6-7%, adjusted for inflation.
Stock prices rise consistently in the short term and only decrease during recessions. The stock market has an average annual return of 15%, adjusted for inflation.
The stock market fluctuates in the short term and the majority of investors can predict the direction of the market. The stock market has an average annual return that is negative, adjusted for inflation.
On average, the growth of the stock market matches the rate of inflation. It has an average annual return of 2-3%, adjusted for inflation..
2.
MULTIPLE CHOICE QUESTION
15 mins • 1 pt
Daniel has saved $2,000 in a savings account that earns 0.5% 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
3.
MULTIPLE CHOICE QUESTION
15 mins • 1 pt
What is a bond?
A type of loan you can get from the federal government that you pay back with interest
An investment in which you loan money to a corporation or government and are paid back with interest and the principal that you originally lent to them.
A type of loan you can get from a bank that you pay back with interest
An investment in which you loan money to another individual and are paid back with interest
4.
MULTIPLE CHOICE QUESTION
15 mins • 1 pt
How are active investing and passive investing different?
Active investing requires a hands-off approach while passive investing requires a hands-on approach
Active investing typically has lower fees while passive investing typically has higher fees
Active investing requires you to make a minimum number of trades per day while passive investing does not
Active investing is typically done by a fund manager trying to beat the market while passive investing typically involves investing in a popular index like the S&P 500
5.
MULTIPLE CHOICE QUESTION
15 mins • 1 pt
A commonly used strategy to minimize investing risk is...
Investing only when a stock's value is rising
Investing in only one company
Hiring an investment manager who promises to provide the largest returns
Diversifying across asset classes and within each asset class
6.
MULTIPLE CHOICE QUESTION
15 mins • 1 pt
All of the following are true about a passively managed fund EXCEPT…
Fees for a passively managed fund are typically lower than those for an actively managed fund
Passively managed funds are generally seen as low risk investments
A passively managed fund guarantees the average return of the securities it includes
Passively managed funds are managed by a fund manager
7.
MULTIPLE CHOICE QUESTION
15 mins • 1 pt
Why is compound interest more advantageous than simple interest?
It’s more difficult to calculate, so fewer people use compound interest, making more profits for those who do.
Compound interest accumulates very rapidly, so you only have to save for 3 years or fewer to earn far more money.
Compound interest is attached to the stocks with the highest risk, so you get the highest interest on them.
In compound interest, you earn interest on not only your principal, but also on the interest you’ve already made.
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