Practice Quiz 2.2: Saving and Investing

When financing a home purchase, you will need to have a(n):

• Mortgage

• Mutual Fund

• Bond

• 401K

What is a savings account primarily used for?

• High-risk investments

• Storing money safely while earning a little interest

• Trading low-risk stocks and bonds

• Storing money that you receive from employment and use to pay your bills.

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DOK Level 1: Recall

What does it mean to buy a stock?

• Lending money to the government

• Owning a portion of a company

• Saving money in a bank

• Borrowing money from a broker

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DOK Level 1: Recall

What is the primary purpose of diversification in an investment portfolio?

• To increase the complexity of the portfolio

• To focus solely on high-risk assets

• To reduce risk by spreading investments across various assets

• To guarantee a profit on investments

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DOK Level 1: Recall

Why might an investor choose to invest in a mutual fund?

• To gain direct control over the choice of individual stocks

• To avoid any type of financial risk

• To benefit from professional management and diversification

• Because mutual funds guarantee a fixed return

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DOK Level 2: Skill/Concept

Why might an investor choose a mutual fund over individual stocks?

• Mutual funds offer guaranteed profits

• Mutual funds are less risky due to diversification

• Mutual funds do not require management

• Mutual funds always outperform the stock market

Which investment is the most risky?

• bond

• stock

• mutual fund

• savings account

A bank account where you can store money you don't need right away but keep it easily available and safe. You usually earn interest on this type of account.

• Checking Account

• FICO score

• Credit

• Savings account

A(n) _____________________ is the purchase of goods that are not consumed today but are used in the future to create wealth 

• Credit

• Investment

• Income

• Savings

A key difference between saving and investing is

• Saving is for everyone, investing is for the wealthy

• Your money is insured when investing, it is not in savings

• Investing has a guaranteed return, savings does not

• Saving is for emergencies & goals, investing is for long-term wealth