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.
Stocks have outperformed every other type of investment because ______.
Choose wisely. There is only one correct answer.
Their returns are not fixed. Stocks have unlimited earning capacity.
2.
The interest you earn on a savings account is taxed differently from the money you earn at your job.
Choose wisely. There is only one correct answer.
False. It is taxed the same way, that is, as ordinary income.
3.
What are some reasons why people invest their money?
Choose wisely. There is only one correct answer.
All of the above. These -- and many others -- are the most common reasons people invest their money.
4.
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.
5.
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.
6.
What is asset allocation?
Choose wisely. There is only one correct answer.
Determining how much money to spend on different types of assets. Asset allocation is a big term, but it refers to how we distribute our money among investments.