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It is possible to buy shares of a mutual fund directly from the fund instead of through a broker.

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True

False

True. Although you can buy shares through a broker, most funds also let you buy shares directly from the funds themselves.

Which bonds are subject to credit risk?

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Municipal

Government

Corporate

Both municipal and corporate

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.

Which of the following is not a characteristic of a cash investment?

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Liquidity

Moderate return

Safety

The return may not keep pace with inflation.

Moderate return. Cash investments have historically provided low returns because they are safe and liquid.

What ultimately causes stock prices to rise?

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Companies increase their profits in the future.

Companies raise the stock prices voluntarily.

Companies sell more products and services.

All of the above

Companies increase their profits in the future. Ultimately, a rise in profits causes stocks to grow in value, which leads to rising stock prices.

Compound interest is interest that is calculated only on the principal you invest.

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True

False

False. Compound interest is interest that is calculated on the principal you invest plus any interest you earn.

As a rule, the longer your time horizon is for investing, the more aggressive you can be with your investments.

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True

False

True. This is due to the fact that you will have more time to recoup losses.

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