Basics Beginner: Investments

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1.
When a bond matures, what happens to it?
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The money gets paid back to you. When a bond matures (that is, when its term ends), the money in it gets paid back to you, along with any interest that is yet due.
2.
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.
3.
What is time horizon?
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The length of time over which you will be investing your money. Your time horizon will be a factor when choosing investments.
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.
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.
6.
What is the most commonly used type of cash investment?
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Savings account. A savings account is made up of cash you deposit, but unlike the cash in your pocket, it pays some interest to you.