Finance Q2 Test A

What is investing?

• Borrowing money to earn a return

• Putting money into assets to generate a return over time

• Selling assets to generate immediate cash

• Holding money in a savings account

What is risk in investing?

• The potential return on an investment

• The chance of losing money on an investment

• The time it takes for an investment to grow

• The cost of purchasing assets

What is reward in investing?

• The potential return you can earn from an investment

• The risk you take to invest

• The amount of time you hold an investment

• The taxes you owe on investments

What is the relationship between risk and reward in investing?

• The higher the reward, the lower the risk

• The higher the risk, the higher the reward

• Risk and reward are unrelated

• There is no reward without risk

What is an index fund?

• A mutual fund that focuses on a single stock

• A fund that tracks a specific market index

• A fund that invests in commodities

• A private investment vehicle for wealthy individuals

Which of the following is an advantage of index funds?

• High fees

• Active management

• Low fees and diversification

• Limited stock options

What is a disadvantage of index funds?

• High risk of losing money

• They tend to outperform the market

• Limited flexibility in stock selection

• They only invest in real estate

How do index funds provide diversification?

• They invest in a single stock

• They invest in multiple stocks from a market index

• They only invest in bonds

• They invest in only high-risk assets

What is a mutual fund?

Which of the following is an advantage of mutual funds?

• Lack of diversification

• No professional management

• Diversification and professional management

• Higher risk and fewer options