Investing Quiz- Stocks & Bonds

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

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

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

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

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

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

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

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

• 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 a higher return when they invest in a high risk asset
• Investors expect to earn zero return when investing in a low risk asset

9. Why is diversification a recommended investment strategy?

• 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
• Diversifying your portfolio helps reduce risk
• 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