Unit 6 Test - Investing - Retake

What is a key difference between saving and investing?

• Saving is for long-term goals; investing is for short-term goals
• Saving earns a much higher rate of return than investing your money
• Saving guarantees you the money you put away while investing has no guarantees.

Select the best definition of compound interest.

• Compound interest is earning interest on the original amount you deposited.
• Compound interest is earning interest on the original amount you deposited plus any interest earned.
• Compound interest is the amount of interest you are charged on your bank account each month.

What is a stock?

• A stock is a share of ownership in a company.
• A stock is a lending investment to the government or a company.
• A stock is an insured bank account with high risk.

4) What type of market is described by a receding economy and a decline in the stock market?

• Bear Market
• Pig Market
• Sheep Market

What is the current trading price of McDonald's stock?

• $188.50
• $186.75
• $24.43

Duncan plans to invest all of his money in individual stocks. Why is this likely a bad investment strategy?

• Purchasing individual stocks has a very low amount of risk and a low return.
• He will need to open multiple brokerage accounts for each stock he purchases.
• Purchasing individual stocks has a high amount of risk and little diversification.

Which statement best describes the risk level of bonds?

• Bonds have a low to moderate amount of risk and are less risky than stocks.
• Bonds have no risk.
• Bonds have high risk and you can lose all of your investment

What is one way you can earn money by investing in bonds?

• Through interest collected on your original investment.
• By selling your shares in the bond.
• By purchasing a diversified bond type.

Dahlia is 24 years old. She makes $85,000 per year, has a fully funded Emergency Fund, and extra income each month. What should be her investor risk level?

• Agressive
• Average
• Don't do anything

Which of the following is a characteristic of an index fund?

• Diversified
• Professionally managed
• Has voting rights