Basics Beginner: Investments

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1.
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.
2.
Which bonds are subject to credit risk?
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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.
3.
It is possible to buy shares of a mutual fund directly from the fund instead of through a broker.
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True. Although you can buy shares through a broker, most funds also let you buy shares directly from the funds themselves.
4.
The primary risk associated with cash investments is _______.
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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.
5.
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.
6.
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.