Review 6A: Investing

All of the following are reasons to invest, EXCEPT…

• To minimize the impact on inflation, which causes you to lose purchasing power

• To earn a consistent rate of return with lower risk than typical savings accounts

• To build wealth by reinvesting your returns and allowing them to compound

• To earn higher average rates of return than you would in a typical savings account

Which of the following statements BEST describes investing?

• Putting $100 per month into an FDIC-insured bank account for short-term goals

• Buying and selling stocks within the same day to take advantage of short-term price variation

• Reducing the purchasing power of your money over time

• Buying assets, like stocks, with the intention to hold them and grow your wealth over the long term

An investor can best harness the power of compounding by doing all of the following, EXCEPT…

• Making frequent trades

• Starting to invest early

• Reinvesting earnings

• Minimizing risk

Which of the following statements BEST describes the stock market?

• Businesses listing their entire company for sale

• Businesses selling partial ownership of their companies to raise capital

• Investors buying stock in hopes of being hired by companies

• People making donations to companies that need funding

During a BULL market…

• Investors are pessimistic about how the stock market will perform

• The economy is not doing as well

• More investors are buying stocks, which causes stock values to increase

• The unemployment rate in the country increases

Over time, the stock market has…

• Experienced highs and lows but increased in overall value

• Had slight ups and downs but stayed about the same in value

• Rarely experienced changes and has maintained the exact same value

• Gone through severe ups and downs with an overall decrease in value

What is a stock?

• A measurement of a company’s profits

• An investment option that allows you to own a small piece of a company

• An annual report that includes details about a company’s leadership and earnings

• A low-risk savings option that can help you build an emergency fund

When reading a stock quote, which of the following metrics would give you the best idea of the total value of the company?

• The stock ticker symbol

• The price change of the stock, quoted as a percentage

• The market cap

• The stock’s opening and closing price for that day

Which of the following is TRUE about a stock split?

• Stock splits impact the overall value of a company

• Stock splits decrease the number of shares you own

• Stock splits indicate that a company is doing poorly

• Stock splits make a stock more accessible to a greater number of investors

Which of the following most accurately describes what a bond is?

• A bond is a government loan made to an individual investor with the expectation that it will be paid back with interest

• A bond is an investment in which a corporation lends an individual investor money with the expectation that it will be paid back with interest

• A bond is a government loan made to a corporation with the expectation that it will be paid back with interest

• A bond is an investment in which an investor lends money to a corporation or government with the expectation that it will be paid back with interest