Investment Knowledge Quiz

What is the relationship between risk and return in investments?

• Higher risk leads to lower possible return

• Lower risk leads to higher possible return

• Higher risk leads to higher possible return

• Risk and return are unrelated

What is a bond?

• A certificate issued in exchange for borrowed money plus interest

• A type of stock that pays dividends

• A savings account with a fixed interest rate

• A loan given to a corporation without interest

What is the maturity of a bond?

• The amount of borrowed money

• The life of the bond or end of term of the investment

• The periodic payment made to bondholders

• The interest rate of the bond

Which type of bond is considered the safest and most attractive due to no risk of default?

• Corporate Bonds

• Municipal Bonds

• Government Bonds

• Junk Bonds

Which bond rating range is considered the safest?

• AAA to BBB

• BB to D

• CCC to B

• A to C

What are Certificates of Deposit (CDs) also known as?

• Time deposits

• Savings accounts

• Checking accounts

• Investment bonds

What is a disadvantage of withdrawing money from a CD before its maturity date?

• You have to pay a penalty

• You lose all interest earned

• You cannot withdraw early

• You must pay a higher interest rate

What do stocks represent?

• Shares of ownership in a corporation

• A type of loan to a corporation

• A form of government bond

• A type of savings account

Why do corporations issue stock?

• To raise funds to expand their business

• To decrease their market value

• To avoid paying taxes

• To increase employee salaries

How do investors make money by buying stocks?

• Through capital gains and dividends

• By receiving interest payments

• By selling bonds

• By renting out stocks