Step 3: Investing in Stocks and Bonds

What is a key risk for bondholders?

• Company bankruptcy

• Borrower default

• Stock market crash

• Inflation

According to Warren Buffet, what would he choose between stocks, bonds, or other investments?

• Bonds

• Equities

• Real estate

• Commodities

What is the relationship between risk and return for stocks compared to bonds?

• Stocks are less risky and less profitable

• Stocks are more risky and more profitable

• Stocks are less risky and more profitable

• Stocks are more risky and less profitable

What is the average compound 40-year return of long-term U.S. government bonds from 1928 to 2019?

• 3.5%

• 4.5%

• 5.5%

• 6.5%

What does owning a bond from a company or government entity mean?

• You are buying a share

• You are lending money

• You are receiving a dividend

• You are purchasing a product

What does the repayment of a bond depend on?

• The company's performance

• The stock market index

• The agreed-upon terms

• The inflation rate

What was the average compound 40-year return of the U.S. stock market as defined by the S&P 500 Index?

• 5.5%

• 8.0%

• 10.9%

• 12.5%

For an investor adding $5,000 a year for 40 years, what would be the result of the 10.9% return of the S&P 500?

• $1.3 million

• $2.83 million

• $683,028

• $1.5 million

Why is it a mistake for young people to use bonds for a major part of their portfolio?

• Bonds are too risky.

• Bonds do not offer growth.

• Bonds are too expensive.

• Bonds are not available to young investors.

What form of payback from owning equity in a company in the form of stock can an investor receive?

• Selling the stock to another investor

• Dividend distributions from profits

• Selling the stock and dividends from profits

• Interest on the money invested in the stock