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 ________.
Choose wisely. There is only one correct answer.
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.
During your working years, what do you need your investments to do the most of for you?
Choose wisely. There is only one correct answer.
Grow. If you are like most people, you will need your investments to grow so that when you are older, you can withdraw sufficient money from them to live on.
3.
If you own a bond with an interest rate of 4% and rates increase to 5%, what will happen to the value of the bond if you try to sell it?
Choose wisely. There is only one correct answer.
It will decrease. If interest rates rise, the price of the bond on the market will decline because investors will seek bonds with these new, higher rates. This occurs with US government bonds too, and if you were to sell it before it matures, you would sell for less than you invested. If you hold the US government bond until its maturity date, you will receive all of your principal back.
4.
It is possible to buy shares of a mutual fund directly from the fund instead of through a broker.
Choose wisely. There is only one correct answer.
True. Although you can buy shares through a broker, most funds also let you buy shares directly from the funds themselves.
5.
The primary risk associated with cash investments is _______.
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Inflation. Cash investments provide safety of principal and liquidity. But because of this, they offer a very low rate of return, often lower than the rate of inflation.
6.
When you purchase stock from a company, you become _______ of the company.
Choose wisely. There is only one correct answer.
An owner. When you purchase stock, you receive shares of ownership from the company.