Personal Finance Investing Question Preview (ID: 40043)


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How can investors receive compounding returns?
a) By selecting a savings account that has a higher interest rate
b) By investing their earnings back into their original investment
c) By transferring their earnings into a high-risk investment
d) By diversifying their investment portfolio

What are dividends?
a) A small part, or share, of a company.
b) A type of savings account that grows over time.
c) A distribution of a small percentage of profits to shareholders.
d) None of the above.

When you buy a ____ , you are loaning money to an organization.
a) Stock
b) Bond
c) Mutual fund
d) Index fund

What happens when a bond becomes due?
a) You pay it back to the issuer, minus interest
b) The issuer will pay you back, plus interest
c) You pay it back to the issuer, plus interest
d) The issuer will pay you back, minus interest

Which best describes the difference between stocks and bonds?
a) Stocks allow investors to share in profits; bonds make investors responsible for company debts.
b) Stocks allow investors to own a portion of the company; bonds are loans to the company
c) Stocks pay interest to investors throughout the year; bonds only pay interest at fixed times during the year
d) Stocks are a more reliable investment; bonds tend to be more volatile.

What is the primary reason to issue stock?
a) To help investors earn a higher rate of return
b) To distribute the risk of bankruptcy across more investors
c) To raise money to grow the company
d) To increase investor awareness of the company

When it comes to investing, what is the typical relationship between risk and return?
a) The greater the potential risk, the smaller the potential return.
b) The greater the potential risk, the greater the potential return
c) There is no relationship between risk and return
d) It depends on the investment mix in your portfolio

If an employer does not offer a retirement plan, what might be another way to save for retirement?
a) Traditional IRA
b) Roth IRA
c) 401k Plan
d) Both A and B

________ are typically comprised of a mix of ________ and ________
a) Stocks; bonds; index funds
b) Bonds; index funds; mutual funds
c) Mutual funds; stocks; bonds
d) Stocks; index funds; bonds

Why might a town decide to issue bonds?
a) To help save money for their residents.
b) To build new roads or bridges.
c) Both A and B
d) Neither A nor B

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