8. Which of the statements below BEST describes the relationship between risk and return when considering an investment?

Investors expect to earn a higher return when they invest in a high risk asset

Investors expect to earn a lower return when they invest in a high risk asset

Investors expect to earn a higher return when they invest in a low risk asset

Investors expect to earn zero return when investing in a low risk asset

9. Why is diversification a recommended investment strategy?

Diversifying your portfolio helps reduce risk

Investing in a diversified portfolio guarantees that you won’t lose money with your investments

If you tell your fund manager to use diversification, they’ll charge you lower fees

If you diversify your portfolio, you will definitely earn a high return

10. As a shareholder in a public company, what are the benefits available to you?

You may receive dividends from the company, if the company pays them, and you have ownership of a portion of the company

You must receive dividends from the company (all companies must pay them) and you can select members of the management team (e.g., the Chief Executive Officer (CEO))

You can select members of the management team [e.g., the Chief Executive Officer (CEO)] and vote for members of the Board of Directors

You have ownership of a portion of the company and receive coupon payments from the issuer

Investing Quiz- Stocks & Bonds

Authored by Chelsea Wells

others

12th Grade

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10 questions

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MULTIPLE CHOICE QUESTION

30 sec • 10 pts

1.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

MULTIPLE CHOICE QUESTION

30 sec • 10 pts

2. 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

MULTIPLE CHOICE QUESTION

30 sec • 10 pts

3. One difference between bonds and bond funds is…

Buying an individual bond is generally cheaper than buying a bond fund

A bond fund can help you diversify your investment portfolio

Bonds pay dividends to its investors

You receive the principal amount you invest in a bond fund after a certain amount of time

MULTIPLE CHOICE QUESTION

30 sec • 10 pts

4. Which of the following accurately describes a difference between an individual bond compared to a bond fund?

A bond pays you dividends while a bond fund pays you regular interest

A bond guarantees you a higher rate of return than a bond fund

A bond is issued by a company while bond funds only invest in government bonds

A bond is considered to be a less diversified investment than a bond fund

MULTIPLE CHOICE QUESTION

30 sec • 10 pts

5. How is a bond different from a stock?

A bond is a loan you give to an organization while a stock is partial ownership in a company

Bonds are typically riskier than stocks but have the potential to earn higher returns

Bonds are usually issued by smaller startup companies while stocks are issued by well established organizations

Bonds are best for earning high returns while stocks are best for providing a stable source of income

MULTIPLE CHOICE QUESTION

30 sec • 10 pts

6. How can someone make money from investing in a stock?

They sell the stock for a lower price than what they bought it for

They receive dividends or they sell the stock at a higher price than what they bought it for

The stock loses value but the overall market experiences a positive return

They sell the stock for the same price they bought it for

MULTIPLE CHOICE QUESTION

30 sec • 10 pts

7. You bought 10 shares of stock in StreamingVideoCo for $45 per share. Two months later you sold the 10 shares of stock for $80 per share. What was your profit or loss on StreamingVideoCo stock? (Assume that StreamingVideoCo didn't pay a dividend and that you didn't incur any trading fees during that period.)

Loss of $800

Profit of $350

Loss of $450

Profit of $800

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