financial math test review unit 9 investing ( stocks & Bonds)

A commonly used strategy ti minimize investment risk is...

Diversifying across asset classes and within each asset class.

What are the two ways investors can earn money from a stock?

Dividends are selling the stock at a higher price than they bought it.

What is a bond?

An investment in which you loan money to a corporation or government and are paid back with interest and the principal that you originally lent to them.

Which of the following explains why risk is not always bad when it comes to investing?

As risk increases, so does the possibility of greater returns.

Danie; has saved $2,000 in a savings account that earns 0.5% interest annually. What will most likely happen to the purchasing power of his savings over time?

His purchasing power will DECREASE because the interest rate is lower than the historical rate of inflation.

All of the following are risks of investing in a single stock, EXCEPT...

If the company does not issue new stock, current stockholders could lose their entire investment.

Ben is 24 and wants to start saving for retirement. What can he do to set himself up for success?

Invest 10-15% of his monthly salary.

which of the following is TRUE about investing?

It can help you grow your money through the power of compounding.

What does "ROI" stand for as it relates to stocks?

Return on investment.

Sanjana is explaining what Social Security is to her younger brother. Which of the following descriptions should she use?

Social Security is a government program that pools contributions from current workers to then provide retirement support benefits to those who are eligible.

You buy a bond with a fixed coupon rate of 5%. A year later, similar bonds that are issued have a coupon rate of 3%. Which of the following is TRUE?

The price of your bond will increase.

Which of the following is TRUE, based on the historic returns of the S&P 500?

The stock market fluctuates in the short term and is difficult to predict. It has an average annual return of 6-7%. Adjusted for inflation.

What does "YTM" stand for as it relates to bonds?

Yield to maturity.

All of the following are advantages of saving for retirement in a 401(k), EXCEPT...

You can withdraw money at any time without paying a penalty.

All of the following should be considered when creating your investing strategy, EXCEPT...

Your credit score.