Investment Types
What is the main trade-off when you're making an investment?
A. Time vs. Liquidity
B. Risk vs. Reward
C. Capital vs. Labor
D. Income vs. Expenses
B. Risk vs. Reward
What do financial intermediaries like banks and credit unions do with money deposited into their accounts?
A. They hold these finances and leave them unused
B. Use it to pay government employees
C. Use the money to lend to borrowers.
D. They use the money to invest it wisely, generating earnings that allow them to pay their employees and return your money with added value.
C. Use the money to lend to borrowers.
A ____ is a long-term contract that requires repayment of borrowed money and interest on the borrowed funds at regulars intervals over time.
A. Bonds
B. Lease
C. Credit Agreement
D. Mortgage Plan
A. Bonds
What is equity?
A. The interest rate on a loan
B. Stocks that represent ownership of companies.
C. Equity is the total revenue a company earns.
D. Equity means having equal pay for everyone.
B. Stocks that represent ownership of companies.
What is a mutual fund?
A. A company that sells shares of securities to individual investors.
B. A mutual fund is a savings account that earns interest based on the stock market.
C. Mutual funds are only available through accounts like 401k's.
D. Mutual funds are funds that are shared in a joint account with people of your choosing.
A. A company that sells shares of securities to individual investors.
What investment strategy involves spreading your funds across a wide variety of investments?
A. Speculation
B. Diversification
C. Hedging
D. Leverage
B. Diversification
Why do investors usually expect higher compensations for riskier investments?
A. They don't expect more compensation since they can make more money from riskier bonds.
B. Investors want to be rewarded for taking on more uncertainty.
C. Riskier investments don't take much time to manage.
D. All risky investments are guaranteed to profit eventually.
B. Investors want to be rewarded for taking on more uncertainty.
_____ refers to the life of a bond.
A. Lifespan
B. Maturity
C. Age
D. Dog years
B. Maturity
Who is a stockbroker?
A. A person who manages company budgets.
B. A trader who only works at the stock exchange.
C. A person who works at a credit union.
D. A person who buys or sells equities for their clients.
D. A person who buys or sells equities for their clients.
What is the market value of a mutual fund called?
A. The stock price of the fund.
B. The equity rate.
C. Net Asset Value(NAV)
D.Trading value per Share(TVP)
C. Net Asset Value(NAV)
Which of these investments would be most favorable to an individual who is looking for a massive return.
A. Treasury bonds
B. Money Market Funds
C. CD accounts
D. Junk Bonds
D. Junk Bonds
Junks bonds have some of the highest risk to reward ratios.
What is the difference between credit unions and banks?
A. Credit unions are for-profit organizations, while banks are non-profit.
B. Banks offer higher interest rates on loans than credit unions.
C. Credit unions are non-profit, while banks are for-profit.
D. Credit unions offer higher interest rates than banks.
C. Credit unions are non-profit, while banks are for-profit.
____ is the amount borrowed and consequently the amount that must be paid back to the lender by the time the bond reaches its maturity.
A. Per Value
B. Debt
C. Interest Rate
A. Per Value
True or False: The Efficient Market Hypothesis(EMH) is an argument that states stocks are correctly priced and bargains are hard to find since stocks are monitored closely?
True
The theory states that stocks are monitored tirelessly by professional analyst in a large amount of companies.
What plan is used to plan your retirement?
A. The Buffet Plan.
B. 401k Plan.
C. The Anaconda Plan.
D. The 3 Point Rule.
B. 401k Plan.
A tax deferred investment and savings plan that acts as a personal pension fund for employees.
What famous public figure said "Patience and diversification lead to long term success."
A. Warren Buffet
B. Barack Obama
C. John F. Kennedy
D. Dave Ramsey
A. Warren Buffet
What institution is considered the center of U.S. financial markets and investing?
A. Wall Street
B. The IRS Building
C. The Federal Reserve Bank
D. J.P. Morgan
A. Wall Street
____ is the rate of interest that is paid on the per value.
A. Fixed rate
B. Debt
C. Coupon Rate
D. Inflation
C. Coupon Rate
True or False: If it is implied in the Efficient Market Hypothesis That all stock are under 24/7 surveillance, then it matters what stocks you invest in.
False
Since stocks are under surveillance by thousands of analyst it does not matter what stocks you invest in because over time the win and losses will even out.
True or False: In a stock or securities exchange, two companies exchange their employee's stocks.
False
A stock or securities exchange is place where buyers and sellers meet to trade stocks.
One way to classify an investment could be based on there risk to reward ratio. Can you rank these investments in order from least risk to most risk?
1. Certificates of deposit account
2. Investment-grade bond
3. Common Stock
4. Preferred Stock
1. Certificates of deposit account
2. investment-grade bond
3. Preferred stock
4. Common stock
How do pension funds generally use contributions?
A. Invest in high-risk, short-term stocks.
B. Invest in corporate stocks and bonds for long-term growth.
C. Buy real estate properties for quick returns.
D. Keep the money in cash for easy withdrawals.
B. Invest in corporate stocks and bonds for long-term growth.
One market for financial assets is the ___, where only the ordinary issuer can sell or repurchase a financial asset.
A. Secondary Market
B. Money Market
C. Capital Market
D. Primary Market
D. Primary Market.
Which of these is a popular strategy for offsetting declines?
A. The Goldberg Method
B. Portfolio Diversification
C. Resume Loaning
D. Applied Diversification
B. Portfolio Diversification
It is a popular strategy as it involves in holding a lot of different stocks whose winnings can offset declines in others.
True or False: the Standard & Poor's 500 (S&P 500) uses the price changes of 500 representative stocks as an indicator of overall market performance.
True.