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.
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.
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.
Which bonds are subject to credit risk?
Choose wisely. There is only one correct answer.
Both municipal and corporate. Corporate and municipal bonds are subject to credit risk, and the value of their bonds can be impacted if the financial strength of the company or municipality declines.
4.
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.
5.
What ultimately causes stock prices to rise?
Choose wisely. There is only one correct answer.
Companies increase their profits in the future. Ultimately, a rise in profits causes stocks to grow in value, which leads to rising stock prices.
6.
The primary risk associated with cash investments is _______.
Choose wisely. There is only one correct answer.
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.