Financial Planning Courses: Investments

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1.
Investors with a long-term goal like retirement in 20 or more years who are willing to live with significant declines in the short run often choose to allocate a higher percentage of their investment dollars to ________.
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Stocks. Stocks have historically returned much higher returns than bonds and cash for long-term investors; however, the investor must be willing to live with significant declines in stock values over the short term and the potential of losing money.
2.
One of the risks of investing in bonds is interest rate risk. This means that if interest rates rise, your bond will be earning less than new bonds.
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True. This is one risk of investing in bonds.
3.
What is a mutual fund?
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A ready-made portfolio of securities investments. Mutual funds are convenient because the investments in them have already been selected. You and many others invest your money into the fund and thereby participate in the gains and losses of the fund's investments.
4.
When you buy shares of stock in a company, you _______.
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All of the above. Owning stock comes with all these benefits, though it should be noted that dividends are not always guaranteed to be paid.
5.
The interest you earn on a savings account or similar cash investment is not taxed as ordinary income by the federal government.
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False. Interest is taxed as ordinary income at both the state (if you are required to pay state taxes) and federal levels.
6.
Compound interest is interest that is calculated only on the principal you invest.
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False. Compound interest is interest that is calculated on the principal you invest plus any interest you earn.