Understanding Investments and Savings

When companies like Exxon, Tesla, or General Electric make a profit and report their earnings, what do investors typically receive?

• Dividends

• Interest payments

• Premiums

• Rent

Which type of stock typically gives voting rights to shareholders?

• Preferred stock

• Common stock

• Corporate bond

• Mutual fund

Which retirement savings option guarantees that you do not pay taxes on your money when you withdraw it at retirement?

• Traditional IRA

• Roth IRA

• 401(k)

• Pension plan

What is the relationship between risk and reward in investments?

• Lower risk always leads to higher reward

• Higher risk is usually associated with the potential for higher reward

• Risk and reward are unrelated

• Lower risk always leads to lower reward

What is the main difference between common stock and preferred stock?

• Common stockholders have priority in dividends over preferred stockholders

• Preferred stockholders have priority in dividends over common stockholders

• Both have equal voting rights

• Preferred stockholders can only buy bonds

If you want a single investment type that offers the greatest potential reward regardless of risk, which would you likely choose?

• Savings account

• Government bonds

• Stocks

• Certificate of deposit

Which of the following best explains why Kevin’s account balance increases by a slightly larger amount each year?

• The bank is adding bonuses each year

• Interest is being calculated on the new total each year (compounding)

• The interest rate is increasing each year

• Kevin is making additional deposits

If you invest in a Roth IRA, what is the main tax advantage you receive at retirement?

• You pay taxes on withdrawals

• You pay no taxes on withdrawals

• You pay higher taxes on contributions

• You pay taxes on dividends only

Why might an investor choose preferred stock over common stock?

• To have more voting rights

• To receive dividends before common stockholders

• To avoid all risk

• To guarantee stock price increases

Suppose you are planning your investment strategy. How would you balance risk and reward to achieve long-term financial goals?

• Invest only in high-risk stocks for maximum reward

• Diversify investments to balance potential risks and rewards

• Avoid all investments to eliminate risk

• Invest only in savings accounts