WorksheetsInvesting 1
Total questions: 20
Worksheet time: 10mins
What is the primary difference between investing and trading?
Investing involves high-risk assets, while trading involves low-risk assets.
Investing is buying and selling assets quickly, while trading is holding assets long-term.
Investing is holding assets for the long term (years), while trading is buying and selling assets quickly for fast profit.
Trading only involves stocks, while investing involves only bonds.
The main reason for a young person to start investing early is to take advantage of:
Compounding interest/returns, where early profits begin earning their own profits.
The low-risk nature of all early investments.
The fact that stock prices are generally lower for young investors.
The guaranteed profits associated with long-term holding.
What does a person own when they purchase a stock?
A debt (IOU) from the company that must be repaid.
A tiny slice of ownership in a company.
A guaranteed annual interest payment.
The right to borrow money from the company.
A Bull Market is best characterized by:
The stock market remaining flat with no movement.
The stock market being generally strong and rising.
The stock market being generally weak and falling.
High-risk investments being the only ones that make money.
Which term describes a market that is generally weak and falling, like a bear swiping downward?
Bull Market
Index Market
Bear Market
Hard Asset Market
What is an IPO (Initial Public Offering)?
An announcement that a company is merging with a competitor.
The annual meeting where stockholders vote on company leadership.
When a private company sells its shares to the public for the very first time.
The cancellation of a company’s stock listing from the exchange.
A stock split is an action where a company:
Changes all its shares into bonds.
Guarantees a minimum profit for its investors.
Cuts the price of one share by creating more shares, keeping the total investment value the same.
Puts all of its profits back into the company instead of distributing them.
What is a bond?
An ownership stake in a company.
An IOU (debt) where you lend money to a government or company in exchange for interest.
A physical asset that you can touch, like gold or real estate.
A professional manager's selection of stocks and other assets.
Which of the following is considered a Hard Asset?
A. A company stock
B. An IOU (debt)
C. Gold or real estate
D. A professional manager's selection of stocks and other assets.
A Mutual Fund is best described as:
A single stock that guarantees a high return.
An investment that only buys government bonds.
A big pool of money from many investors used to buy a variety of stocks and bonds, managed by an expert.
A checking account that pays a high rate of interest.
The main advantage of investing in a Mutual Fund is:
Guaranteed protection against any market losses.
Instant variety (diversification) and professional management.
The ability to quickly trade assets every day.
It only invests in the safest Investment Grade Bonds.
What is the primary goal of an Index Fund?
To try and consistently beat the entire stock market.
To buy only the highest-risk, highest-reward stocks.
To match the performance of a specific market index, like the S&P 500.
To convert stocks into Hard Assets.
The concept of balancing out a risky stock portfolio with safer investments like bonds is known as:
High Yield Investing
Diversification
Corporate Issuance
Which type of bond is generally considered the safest investment because it is issued by the national government?
Corporate Bond
High Yield Bond
Investment Grade Bond
Government Bond
A Corporate Bond is a loan made to:
An international government.
The U.S. Federal Reserve.
A for-profit company to raise money for its operations.
A pool of many different investors.
Which term describes bonds issued by companies with a strong financial reputation and are considered very likely to pay back the loan?
High Yield Bond
Investment Grade Bond
Bear Market Bond
Treasury Bond
Why do High Yield Bonds offer a higher interest rate compared to other bonds?
They are the only bonds that are tax-free.
Because they come from companies considered a higher risk of not being able to pay back the loan.
They are tied to the performance of the stock market.
They are only sold to young investors just starting out.
What is the relationship between the risk of a bond and its interest rate?
Lower risk always means a higher interest rate.
Risk and interest rate have no connection.
The higher the risk, the higher the interest rate must be to reward the investor.
They are only related during a Bear Market.
When the Federal Reserve raises its main interest rate, what generally happens to the interest rate on new bonds coming out?
They offer lower rates to compete with the stock market.
They also offer higher rates.
They become tax-exempt.
They stop being issued altogether.
When the Federal Reserve raises its interest rate, what generally happens to the market price of older bonds with lower, fixed rates?
Their market price increases because they are now rare.
Their market price drops because they become less attractive than newer, higher-rate bonds.
Their interest rate automatically increases to match the new Federal Rate.
They are automatically converted into Investment Grade Bonds.
