What is the key difference between saving and investing?

Saving guarantees the money you put away while investing has no guarantees

J plans to invest all of his money in individual stocks. Why is this likely a bas investment strategy?

Purchasing individual stocks has a high risk and little diversification

What is one requirement to open a custodial IRA account?

You must have taxable income or wages

A stock is a share of ownership of a company

Which statement best describes the risk level of bonds?

Bonds have a low to moderate amount of risk and are less risky than stocks

Why is it important for you to understand YOUR risk tolerance before you start investing?

Create an investment portfolio with the amount of risk you can take

Select the best definition of compound interest.

Earning interest on the original amount you deposited plus interest earned

What is one way you can earn money by investing in bonds?

Through interest collected on your original investment

Which statement best describes how diversification impacts risk when you are investing?

Spreading you money across multiple investments, which decreases risk

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Financial Literacy- Unit 6- Investing

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Questions 14

Answers

1
What is the key difference between saving and investing?
Saving earns a much higher rate of return than investing your money
Saving earns compound interest while investing earns simple interest
Saving is for long-term goals, investing is for short-term goals
Saving guarantees the money you put away while investing has no guarantees
2
J plans to invest all of his money in individual stocks. Why is this likely a bas investment strategy?
Purchasing individual stocks has a high risk and little diversification
He will need to open multiple brokerage accounts for each stock he buys
He will need a large amount of money to invest in individual stocks
Buying individual stocks has a very low amount of risk and a low return
3
What is one requirement to open a custodial IRA account?
You must also open a savings and checking account
You must have a valid driver's license
You must be 18 years old
You must have taxable income or wages
4
What type of market is described by a receding ecomony and a decline in the stock market?
Bear Market
Bull Market
Sheep Market
Pig Market
5
Young, willing to take a moderate amount of risk and wants an investment that is low cost and diversified. Which is best
An index fund
A bond
A savings account
An individual stock
6
What is a stock?
A stock is a share of ownership of a company
Investment that uses money from investors to buy different investments
A stock is an insured bank account with a high risk
A stock is a lending investment to the government or a company
7
14 year old, wants to start investing, has taxable income from working, what type of account should he open?
A 401k
A custodial brokerage account
A traditional savings account
A custodial Roth IRA
8
24 year old, makes $85,000/year, fully funded emergency fund and extra income each month. Whats the investor risk level?
Average
Moderate
Aggressive
Conservative
9
Which statement best describes the risk level of bonds?
One of the riskiest types of investment, but have potential for high return
Bonds have a moderate risk but are a riskier investment than stocks
Bonds have a low to moderate amount of risk and are less risky than stocks
Bonds have no risk
10
Why is it important for you to understand YOUR risk tolerance before you start investing?
High risk tolerance will likely pay less in investment fees
People with low risk tolerance shouldn't invest at all
You must be willing to take a high amount of risk to start investing
Create an investment portfolio with the amount of risk you can take
11
Which of the following is a characteristic of an index fund?
Diversified
High fees
Professionally managed
Insured
12
Select the best definition of compound interest.
Amount of interest you are charged on you bank account each month
Earning interest on the original amount you deposited plus interest earned
Earning interest on the original amount you deposited
Earning a fixed dollar amount on your bank account each month
13
What is one way you can earn money by investing in bonds?
Through interest collected on your original investment
By selling shares in the bond
Through dividends
By purchasing a diversified bond type
14
Which statement best describes how diversification impacts risk when you are investing?
Spreading you money across multiple investments, which increases risk
Putting all your money into one investment, which increases risk
Spreading you money across multiple investments, which decreases risk
Putting all your money into one investment, which decreases risk

Financial Literacy- Unit 6- Investing Flashcards | StudBud