TC2--MSU Adulting: Investing and Risk Quiz

What is the primary difference between saving and investing?

• Saving involves setting money aside for short-term goals, while investing aims to grow wealth over time.

• Saving involves buying stocks, while investing involves keeping money in a savings account.

• Saving is riskier than investing.

• There is no difference; both terms mean the same.

Which of the following best describes compound interest?

• Interest calculated only on the initial principal.

• Interest calculated on the initial principal and the accumulated interest.

• Interest that decreases over time.

• Interest that is paid out immediately.

What does the Rule of 72 help you estimate?

• The time it takes for an investment to double at a given interest rate.

• The amount of interest earned on an investment.

• The total value of an investment.

• The risk level of an investment.

Which of the following is an example of a low-risk investment?

• Stock in a startup company.

• A certificate of deposit (CD).

• Cryptocurrency.

• Real estate in a volatile market.

What is diversification in investing?

• Investing all your money in a single asset.

• Spreading investments across different asset classes to reduce risk.

• Focusing only on high-risk investments.

• Investing in only one industry.

Which of the following is a characteristic of a high-risk investment?

• Guaranteed returns.

• Potential for high returns but also significant losses.

• Stability and predictability.

• Low volatility.

What does "asset allocation" refer to in investing?

• The process of choosing individual stocks.

• The distribution of investments across various asset classes.

• The amount of money invested in a single asset.

• The timing of buying and selling investments.

Why is it important to understand your risk tolerance before investing?

• To ensure you only invest in high-risk assets.

• To choose investments that align with your comfort level and financial goals.

• To avoid investing altogether.

• To maximize potential losses.

Which of the following is a potential reward of investing?

• Guaranteed returns.

• The possibility of earning higher returns than traditional savings methods.

• No risk of losing money.

• Immediate access to funds.

What is the primary purpose of investing?

• To avoid paying taxes.

• To grow wealth over time and achieve financial goals.

• To spend money quickly.

• To eliminate all financial risks.