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Financial Planning Courses: Investments

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1.
What is the most commonly used type of cash investment?
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Savings account. A savings account is made up of cash you deposit, but unlike the cash in your pocket, it pays some interest to you.
2.
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.
3.
In mutual funds, a sales charge is used to compensate the mutual fund manager.
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False. It is to compensate the financial advisor for providing advice. The expense ratio is what compensates the mutual fund manager.
4.
When a company shares some of its profits with its stockholders, what are those profits called?
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Dividends. Dividends are a cut of a company's profits that are shared with stockholders.
5.
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 ________.
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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.
6.
When a bond matures, what happens to it?
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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.