Investing quiz 2 review

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

Why is compound interest more beneficial than simple interest?

• Your money grows faster when it is compounded

• Your taxed on simple interest, but not compound interest

• Fees for compound interest are greater than simple interest

• Compound interest is hard to calculate, so fewer use it

Which would be considered the highest risk investment type?

• Stock

• Mutual Fund

• Bond

• Money Market Account

The relationship between risk and return can be stated as

• Higher risk indicates higher return

• Higher risk indicates lower return

• Lower risk indicates higher return

• No relationship exists between risk and return

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

How can you make money on stocks?

• Buy them when the price is high and sell when the price is low

• Interest

• Dividends

• Holding the stock at least 3 years

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

• Rise

• Fall

• Stay the same

• Interest Rates are not related to bond prices

A _____ is a loan given to an organization while a _______ is partial ownership in the company.

• bond, ETF

• stock, bond

• bond, stock

• ETF, bond

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

Andy bought 5 shares of a company for $10. Later, he sold all 5 shares for $15. What was his profit/loss on the stock?

• Profit of $5

• Loss of $5

• Profit of $25

• Loss of $25