WorksheetsCh 2 Risk, Return & Insurance
Total questions: 30
Worksheet time: 15mins
Which is not true about inflation
it is a general increase in the prices of goods and services
individual purchasing power decrease
hyperinflation is rare
stocks will always outpace inflation
Which is not one of the 3 things the author says you should do to minimize risk when markets fluctuate?
sell when stocks start to drop
diversify for a smoother ride
consider your time horizon
pair down holdings in a bloated market
Why is it important to create a vision board of your financial goals?
To ensure financial goals can be met with your investment plan
to decrease self awareness
To focus only on immediate returns
To ignore long-term planning
Which of the following statements is true about risk?
Risk is always controllable.
Risk levels can be predicted by examining an investments past experience.
Risk is not impacted by by an investment's past experience
Risk is always significant.
An advantage of holding real estate as an investment is that it can be a lucrative as investing in stocks.
true
false
What is a stop loss order?
A type of investment strategy
An order to buy a stock at a lower price
An order to sell a stock when it reaches a certain price
A method to calculate risk
Capital gains and other tax implications are an example of a dis-advantage of holding real-estate for an investment
true
false
What is the relationship between uncertainty and risk in investing?
Uncertainty decreases risk
Uncertainty has no impact on risk
Uncertainty increases risk
Uncertainty guarantees higher returns
historically which investment typically has the highest rate of return over time?
Mutual funds
Bonds
CD's
Stocks
What does considering your time horizon in investments involve?
Investing all money immediately
Ignoring retirement plans
Understanding the amount of time until retirement
Selling all stocks quickly
What should you do in a bloated market according to the strategies?
Buy overpriced investments
Sell all holdings immediately
Pare down holdings and invest in tax sheltered accounts
Ignore market conditions
Which of the following strategies does the author suggests to lower individual investment risk?
Ignore market trends
buy cryptocurrency
Invest all in one stock
purchase insurance
What does 'Diversify' mean in the context of investment risk management?
Investing in a single asset
Spreading investments across various investment categories
Avoiding all investments
Investing only in real estate.
Why might someone consider hiring a professional for investment management?
To ensure all investments are in one place
To gain expert advice and management
to make financial decision for you
To eliminate all risks.
What is the purpose of getting insurance in investment risk management?
To increase investment returns
To cover potential losses and liabilities
To avoid legal responsibilities
To invest in high-risk stocks.
What is one effect of inflation on the cost of living?
Decreases the cost of living
Increases the cost of living
Has no effect on the cost of living
Stabilizes the cost of living.
What happens to the purchasing power of a dollar over time due to inflation?
It increases
It remains the same
It declines
It fluctuates randomly.
What is considered your biggest asset according to the concept of career risk?
Your ability to earn money
Your physical health
Your social connections
Your family background
What is the term for money paid to you for keeping your money in an account?
Dividends
Interest
Capital Gains
Tax Implications
Which of the following is a characteristic of bonds?
Can move money around if not performing
Typically get higher rates of return than checking accounts
Invest for the long-term
Stocks are more volatile
Which statement is true about stocks?
Typically get higher rates of return than savings
are a good place to put your emergency fund
Lower credit quality
Lend money to a business or the government
Which of the following is a potential benefit of investing in real estate?
Immediate liquidity
Long-term returns
No tax implications
Guaranteed profits
Which of the following is a way to engage in small business?
Invest in stocks
Start your own business
Buy government bonds
Open a savings account
A risk assessment tell you what stocks to invest in
true
false
Which is not one of the 3 categories of returns for assets
Interest
Capital gains
Capital loss
dividends
Which is not one of the 4 categories of Risk for Assets?
default
capital gains
inflation
liquidity
A corporation may give dividends to their shareholders
True
False
Which investment has the highest level of risk of not keeping up with inflation
Savings Accounts
checking accounts
Bonds
Stocks
Which investment type has the largest liquidity risk
checking
savings
mutual funds
real estate
Match the following types of investments with their explanation
Stocks
represents a fraction of the ownership of the issuing corporation
Bonds
essentially loans to a corporation or governmental body
Mutual Funds
allows you to invest in all three categories of investments with a smaller amount of money
Cash Alternatives
Includes savings accounts, money markets, CDs, guaranteed investment contracts, etc
