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Personal Finance Investing
Test Description: Perfi
Instructions: Answer all questions to get your test result.
1) How can investors receive compounding returns?
A
By selecting a savings account that has a higher interest rate
B
By diversifying their investment portfolio
C
By investing their earnings back into their original investment
D
By transferring their earnings into a high-risk investment
2) What are dividends?
A
A type of savings account that grows over time.
B
A small part, or share, of a company.
C
None of the above.
D
A distribution of a small percentage of profits to shareholders.
3) When you buy a ____ , you are loaning money to an organization.
A
Stock
B
Index fund
C
Mutual fund
D
Bond
4) What happens when a bond becomes due?
A
The issuer will pay you back, plus interest
B
You pay it back to the issuer, minus interest
C
You pay it back to the issuer, plus interest
D
The issuer will pay you back, minus interest
5) Which best describes the difference between stocks and bonds?
A
Stocks allow investors to own a portion of the company; bonds are loans to the company
B
Stocks allow investors to share in profits; bonds make investors responsible for company debts.
C
Stocks are a more reliable investment; bonds tend to be more volatile.
D
Stocks pay interest to investors throughout the year; bonds only pay interest at fixed times during the year
6) What is the primary reason to issue stock?
A
To increase investor awareness of the company
B
To help investors earn a higher rate of return
C
To raise money to grow the company
D
To distribute the risk of bankruptcy across more investors
7) When it comes to investing, what is the typical relationship between risk and return?
A
There is no relationship between risk and return
B
It depends on the investment mix in your portfolio
C
The greater the potential risk, the greater the potential return
D
The greater the potential risk, the smaller the potential return.
8) If an employer does not offer a retirement plan, what might be another way to save for retirement?
A
Roth IRA
B
Traditional IRA
C
Both A and B
D
401k Plan
9) ________ are typically comprised of a mix of ________ and ________
A
Stocks; bonds; index funds
B
Stocks; index funds; bonds
C
Mutual funds; stocks; bonds
D
Bonds; index funds; mutual funds
10) Why might a town decide to issue bonds?
A
To build new roads or bridges.
B
To help save money for their residents.
C
Both A and B
D
Neither A nor B
*select an answer for all questions
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