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WorksheetsFundamentals of Investing
Total questions: 50
Worksheet time: 26mins
What is inflation?
The rise in the general level of prices
The uncertainty the return on an investment will deviate from what is expected
The number of times something happens to money
The projected value of an investment at the end of a specified period of time
The relationship between risk and return can be stated as:
Higher risk indicates lower return.
Higher risk indicates higher return.
Lower risk indicates higher return.
No relationship exists between risk and return.
Assets purchased with the goal of providing additional income from the asset itself but with the risk of loss is best defined as:
investments.
savings.
bonds.
futures.
A financial plan would not be complete without both savings and investments.
True
False
Investments are more liquid than savings tools.
True
False
With some investments, you may have to wait a long time to access funds.
True
False
Unlike savings tools, investments are:
not secure.
more of a risk.
may not be easily converted into cash.
all of these are correct.
Which has the potential to earn higher returns?
Savings
Checking
Investing
All of these are correct
The profit or income generated by saving and investing is known as :
debt.
inflation.
return.
risk.
What is the percentage (%) of net income that financial experts recommend you commit to saving and investing as part of your spending plan?
10%
5%
15%
20%
Which of these are an example of a long‐term goal that investments can help you achieve?
Down payment on a house
Retirement
College Education
All of these are correct
All investments carry some investment risk.
True
False
Investments are a tool for building net worth.
True
False
The goal of investing is to:
save for emergencies.
use money to eat out, go to movies, etc.
provide a future financial security by building net worth.
have money at the end of the year to go on a trip.
Which type of account is more susceptible to inflation risk?
Savings Account
Checking Account
Mutual Fund
A bond is a form of lending that can be purchased from:
a company.
a city government.
a state government.
the federal government.
All of these are correct.
All bonds have a maturity date.
True
False
High risk bonds tend to have lower interest rates.
True
False
When someone purchases stock in a company, typically they:
own a small percentage of ownership in that company.
owe the government money.
have to sell the stock at a pre‐determined date.
have to pay a dividend back to the company.
If a company performs poorly or goes out of business, a stockholder could lose part or all of their principal investment.
True
False
A dividend is:
the highest amount of return you can earn from a stock purchase.
returns from the sale of property.
share of profits from a company that is distributed to stockholders in the form of cash.
a fee charged for rental of a property.
Market price is:
how much you earn and list on your W-2 form.
the current price that a buyer is willing to pay.
the highest amount of return one can expect from a stock's performance.
the most predictable part of investing.
Real estate investments include:
rental units.
commercial property
any property you plan to earn profits (not including where you live.
all of these are correct.
Real Estate investments are not as time consuming as other
investments.
True
False
The opportunity for large returns on real estate investments is:
high.
low.
Where are Speculative Investments found on the Asset Risk Pyramid?
At the bottom
At the middle
At the top
They are not part of the pyramid
The three types of investor philosophies are Conservative, Moderate and?
Hyperactive
Aggressive
Interactive
Measurable
Mutual funds: (There are two correct answers)
combine funds of many different investors
may include stocks and bonds.
are not sold by broker dealers.
only include stocks and bonds.
Mutual funds are for investors who:
need a quick return on their investment.
tend to have aggressive philosophies toward investing.
want to reduce investment risk.
hate to pay high fees for services.
An index fund:
is a group of similar stocks and bonds.
a type of mutual fund that is designed to reduce fees by investing in the stocks & bonds that make up an index.
requires very little management compared to other
mutual funds.
all of these are correct.
An example of an index is:
the DJIA.
S&P 500.
NASDAQ 100.
all of these are examples of an index.
A person will likely have the same investment philosophy with a 5 year investment vs. a 30 year investment.
True
False
Portfolio Diversification means:
an investor puts “all their eggs in one basket”.
an investor is likely to lose money.
an investor wants to reduce risk.
an investor must sell immediately.
Worldwide, there are many different stock exchanges.
True
False
What do brokerage firms do? (Two correct answers)
Charge fees
Pay your taxes
Act as an intermediary between the stock exchange and the investor.
Brokerage firms do all of these
An advantage of choosing a discount brokerage firm is lower fees.
True
False
Depends
Savings and investments are both forms of unearned income and are therefore NOT subject to income tax.
True
False
Examples of retirement plans include a(n):
IRA.
401k.
403b.
All of these are examples of retirement plans.
A discount Brokerage Firm:
only completes buy & sell orders.
offers financial advice.
provides a financial advisor who works one on one with customers.
none of these are correct.
An organized, central service to buy and sell stocks, bonds and other investments that are traded:
stock exchange.
stock market.
Wall Street.
financial advisor.
Kylee’s Personal Finance class has been discussing the importance of understanding liquidity and she is trying to explain the term to another student. Which statement is the most correct description of liquidity?
How quickly and easily an asset can be converted into cash
The amount of savings available
A measurement of how much a person or household owns once all debts have been paid
The amount of money needed to pay for the necessities and comforts currently enjoyed
When taking advantage of the time value of money, which of the following is most likely to result in the largest return?
Invest a large principal amount of money and then make no additional investments
Invest as long as possible and at the highest interest rate possible
Invest a small amount of money for a short period of time at the highest interest rate possible
Invest at a high interest rate because interest is the only factor that affects return
Simple interest is best defined as:
interest earned on the principal investment.
any form of interest earned from saving or investing.
earning interest on interest.
the effect interest has on the total return on investment.
Dylan is preparing a presentation about saving and the presentation rubric says that he must include an explanation of compounding interest. Which of the following statements would be the best one for him to include to show that he understands compounding interest?
Interest earned on the principal investment
Any form of interest earned from saving or investing
Earning interest on interest
The effect interest has on the total return on investment
When a goal has been set to save $100.00 a month for an emergency fund of $2000.00, giving up food from the vending machine to achieve that goal is the:
opportunity cost.
interest.
specific part of the SMART goal.
trade-off.
In relation to the other options, how liquid is a savings account?
More liquid than cash
Less liquid than mutual funds
More liquid than a Certificate of Deposit
More liquid than a checking account
Hannah needs a savings tool to help her manage her everyday purchases. The savings tool needs to be very liquid and accessible. Which of the following savings tools should Hannah choose?
CD
Checking Account
Money market Deposit Account
Any of these would help Hannah
The most common relationship between risk and return in investing can be stated as:
higher risk indicates lower return.
higher risk indicates higher return.
lower risk indicates higher return.
no relationship exists between risk and return.
Elliot’s stock broker is suggesting that he consider investing in a diversified portfolio. A diversified portfolio is desirable because it:
increases the risk/return ratio.
limits investors choices to only one or two investment tools.
indicates an investor is a good predictor of the return an investment will have.
decreases risk by investing money in a variety of investment tools.
Which of the following is not true in regards to investing in stock?
A stockholder owns a part of a company
Depending upon the current market price, stockholders may pay different prices for the same stock
A stockholder may or may not receive a dividend
A stockholder will always receive a profit when the stock is sold
