Course Catalog > Financial Planning > Courses
Financial Planning Courses: 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.
One of the risks of investing in bonds is interest rate risk. This means that if interest rates rise, your bond will be earning less than new bonds.
Choose wisely. There is only one correct answer.
True. This is one risk of investing in bonds.
3.
Professional management is a benefit of investing in an index mutual fund.
Choose wisely. There is only one correct answer.
False. Index funds are passively managed mutual funds, meaning the portfolios simply mirror an index like the SP 500. Actively managed funds have continuous monitoring and management from investment professionals.
4.
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.
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.
Compound interest is interest that is calculated only on the principal you invest.
Choose wisely. There is only one correct answer.
False. Compound interest is interest that is calculated on the principal you invest plus any interest you earn.