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.
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.
2.
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.
3.
In mutual funds, a sales charge is used to compensate the mutual fund manager.
Choose wisely. There is only one correct answer.
False. It is to compensate the financial advisor for providing advice. The expense ratio is what compensates the mutual fund manager.
4.
During your retirement years, what do you need your investments to do the most of for you?
Choose wisely. There is only one correct answer.
Provide income. During your later years, you will need money to live on, and that will ideally come from your investments. Although growth is good, it also comes with risk, which you don't want during your retirement.
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.
When a bond matures, what happens to it?
Choose wisely. There is only one correct answer.
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.