Investing - Review for Investing Test - NGPF

A key difference between saving and investing is:

• Saving is for everyone, investing is for the wealthy.

• Your money is insured with investing, it is not with saving.

• Investing has a guaranteed return, saving does not.

• Saving is about emergencies and goals, investing is about long-term wealth.

Why is compound interest more beneficial than simple interest?

• Your money grows faster when it's compounded.

• You're taxed on compound interest, but not on simple interest.

• Fees for compound interest are greater than on simple interest.

• Compound interest is harder to calculate so fewer use it.

Which would be considered the highest risk investment type?

• Mutual fund

• Stock

• Bond

• Money Market Account

The relationship between risk and return can be stated as...

• Higher risk equals higher return

• Higher risk equals lower return

• No relationship exists between risk and return

• Lower risk equals higher return

If Jonathan is earning 2% on an investment and inflation is increasing by 3%, what is happening to his purchasing power?

• It's increasing

• It's decreasing

• It's not changing

• Inflation and purchasing power are not related

How can you make money on stocks?

• Buy them when the price is high, sell them when the price is low.

• Interest

• Dividends

• Holding the stock at least three years

If interest rates rise, what will typically happen to bond prices?

• Rise

• Fall

• Stay the same

• Interest rates are not related to bond prices

____ is a loan given to an organization while a ___ is partial ownership in the company.

• Bond, ETF

• Stock, bond

• ETF, bond

• Bond, stock

What's the main difference between a Roth IRA and a Traditional IRA?

• Roth IRA have higher interest rates

• Roth IRAs have you pay taxes up front

• Roth IRAs have higher fees

• Roth IRAs are riskier investments

• Profit $5

• Loss $5

• Profit $25

• Loss $25