Chapter 12 Lesson 2 Understanding Investments

What is a stock?

• A type of bond issued by companies

• A small piece of ownership in a company

• A savings account with a fixed interest rate

• A type of insurance policy

What is the primary purpose of a stock market index?

• To measure the performance of a specific stock

• To track the overall performance of a section of the stock market

• To predict future stock prices

• To determine the interest rates for bonds

What is a bull market?

• A market where stock values drop by 20%

• A market where stock values rise by 20%

• A market with no significant changes in stock values

• A market where only bonds are traded

Which of the following investment options is considered to have a high risk?

• Certificates of deposit (CDs)

• Money market accounts

• Single stocks

• Annuities

What is the main risk associated with investing in single stocks?

• Low interest rates

• High fees and charges

• The company may go bankrupt or fail

• Limited liquidity

What is a bond?

• A type of stock that pays dividends

• A loan you give to a company or government

• A savings account with a fixed interest rate

• A type of mutual fund

Which investment option is described as having moderate risk and return?

• Certificates of deposit (CDs)

• Money market accounts

• Bonds

• Single stocks

What is a mutual fund?

• A pool of money from investors to invest in various assets

• A type of bond with a fixed interest rate

• A savings account with check-writing privileges

• A type of insurance policy

What is the main benefit of annuities?

• High risk and high return

• No investment limits and guarantees on your investment

• High liquidity and flexibility

• Low fees and charges

What should you do before investing in any option?

• Invest in the most popular option

• Consult with an investing professional

• Choose the option with the highest return

• Invest in a single stock for quick gains