Basics Beginner: Investments

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
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.
2.
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.
3.
What results when you sell an investment for more than you paid for it?
Choose wisely. There is only one correct answer.
A capital gain. It can be thought of as a gain on the capital invested.
4.
What is time horizon?
Choose wisely. There is only one correct answer.
The length of time over which you will be investing your money. Your time horizon will be a factor when choosing investments.
5.
Cash investments, like a savings account, are often used to save for goals like _______.
Choose wisely. There is only one correct answer.
Emergency funds. Because of their easy access and safety, they are a good vehicle to add savings dollars to so you can pay for unexpected emergencies when they occur. Retirement is a long-term goal, and most investors are willing to take some risk with their money to have an opportunity to earn a higher return.
6.
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.