Investment Knowledge Quiz

What is the role of the federal government in financial investments according to the text?

• To guarantee all investments

• To pay off its bonds

• To provide investment advice

• To insure all bank accounts

What is the benefit of having a variety of investments in different asset classes?

• It increases risk

• It protects from excessive risk

• It simplifies management

• It guarantees high returns

What is the process of determining how your wealth will be allocated on or before your death called?

• Retirement planning

• Estate planning

• Financial planning

• Investment planning

What is the main focus of estate planning?

• Increasing wealth

• Allocating assets after death

• Reducing taxes

• Planning vacations

What should you be careful about when relying on Social Security?

• Counting too heavily on it

• Receiving it too early

• Not applying for it

• Spending it all at once

What is a possible consequence of not having a will?

• Your assets are distributed according to your wishes

• Heirs may receive different shares than intended

• Your estate avoids probate

• Your estate automatically goes to a non-profit organization

What is the difference between present value and future value?

• Present value is a forecast of future asset value.

• Future value is the current worth of an asset.

• Present value is the value of something today.

• Future value is the value of something today.

What is the time value of money?

• Money today is worth less than money in the future.

• Money today is worth the same as money in the future.

• Money today is worth more than money in the future.

• Money today has no value compared to future money.

What is simple interest?

• Interest earned on both the principal and accumulated interest.

• Interest earned only on the initial principal.

• Interest that decreases over time.

• Interest that is compounded annually.

What is the risk/return trade-off?

• Higher risk always leads to lower returns.

• Lower risk always leads to higher returns.

• Higher risk is associated with the potential for higher returns.

• Risk and return are unrelated.