Personal Finance: Investing Unit Test

When reading a stock quote, which of the following metrics would give you the best idea of the total value of the company?

The market cap

Which type of retirement account is an investment option for ANY young person?

Traditional IRA

Which of the following accurately describes the difference between an individual bond compared to a bond fund?

A bond fund pays you dividends while a bond pays you regular interest payments

How is a bond different from a stock?

A bond is a loan you give to an organization while a stock is partial ownership in a company

Which of the following most accurately describes what a bond is?

A bond is an investment in which an investor lends money to a corporation or government with the expectation that it will be paid back with interest

What is a stock?

An investment option that allows you to own a small piece of a company

Which of the following should you do when taking your rate of return into account?

Assume a conservative rate of return so that you can plant the worst but hope for the best.

All of the following are true about bonds EXCEPT...

Bonds are considered a riskier investment option than stocks.

Daniel has saved $2,000 in a savings account that earns 0.05% 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

How does investing in the stock market differ from putting money in a savings account at a bank?

Investing allows you to accumulate wealth for retirement while saving is best for short-term purchases or emergencies

401(k)s and IRAs are both...

Investment accounts that you can open to help you invest for retirement

When overall interest rates rise (to 8%), the bond you already own (with 4% coupon rate) becomes______ valuable to potential buyers, so its price will ______.

Less, Decrease

You bought 10 shares of stock in StreamingVideoCo for $45 per share. Two months later you sold the 10 shares of stock for $80 per share. What was your profit or loss on StreamingVideoCo stock? (Assume that StreamingVideoCo didn't pay a dividend and that you didn't incur any trading fees during that period.)

Profit of $350

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.

Which of the following is TRUE about a stock split?

Stock splits make a stock more accessible to a greater number of investors

Which of these is NOT a potential solution that was mentioned to fix the Social Security shortfall?

Stop distributing benefits to workers who do not pay into the system

By the end of a bond's maturity, the investor will have received...

The face value of the bond issued and interest payments

What is default risk?

The risk that the company or government is unable to pay back the investor

How can someone make money from investing in a stock?

They receive dividends or they sell the stock at a higher price than what they bought it for

Why will you need slightly more income in each year of your retirement?

You should take the increasing price of goods and services over time into account.