Choose wisely. There is only one correct answer to each question.
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1.
If you buy a stock, it will definitely increase in value over time.
False. Though stocks on the whole have increased in value substantially over the decades, we should not say that a given stock will definitely increase in value over time. Some stocks simply don't.
2.
When you buy a stock, you are _______.
Buying an ownership interest in a company. When you buy a stock, you are buying an ownership interest in a company. Bonds are loans from companies and the government.
3.
Over the long term, which investments provide the lowest real (inflation adjusted) returns?
Savings accounts. Savings accounts provide the lowest real (or inflation adjusted) returns over the long term.
4.
Which of the following investments are the most volatile in their pricing?
Stocks. Stocks are the most volatile. Over the long term, stocks have a higher return than bonds or savings accounts. But this volatility means that over the short term, other types of investments may significantly outperform stocks.
5.
A good way to minimize the effects of bad timing in stock choices is to invest for the short term.
False. A good way to minimize such effects would be to invest for the long term instead, since volatility tends to iron itself out over time.
