Financial Planning Courses: Investments

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1.
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.
Choose wisely. There is only one correct answer.
True. This is one risk of investing in bonds.
2.
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.
3.
As a rule, the longer your time horizon is for investing, the more aggressive you can be with your investments.
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True. This is due to the fact that you will have more time to recoup losses.
4.
Investment diversification can be accomplished by owning _______.
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Small, mid-sized, and large company stocks. Owning many different-sized companies provides diversification because they have different characteristics and generally perform differently based on the economic and market conditions.
5.
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.
6.
The interest you earn on a savings account is taxed differently from the money you earn at your job.
Choose wisely. There is only one correct answer.
False. It is taxed the same way, that is, as ordinary income.