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Investing — Quiz Answers

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1
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A high-risk investment is characterized by

A
superior prospects for short-term gains.
B
lower interest and compound interest rates.
C
a greater percentage chance of loss.
D
a smaller percentage chance of loss.
2
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What might convince an investor to buy stock or mutual funds?

A
belief that a small number of investors have bought the stock so far
B
news that a stock's price has recently increased significantly
C
belief that a company has just reached its peak popularity
D
news that a company is about to release a promising product
3

What is the definition of liquidity?

A
how much income someone has to invest each year
B
how easily an investment can be exchanged for cash
C
how much money someone has in a savings account
D
how difficult it is to maximize returns on investments
4

What is the relationship between risk and return?

A
A higher risk often means a higher return.
B
A lower risk will always mean a lower return.
C
A higher risk often means a lower return.
D
A lower risk always means a higher return.
5

What is the definition of risk?

A
amount made in profit on an investment
B
using borrowed funds for an investment
C
possibility of losing money on an investment
D
putting money into more than one investment
6

Someone who diversifies investments is more likely to

A
increase both risks and returns.
B
offset their losses with gains.
C
reduce both risks and returns.
D
increase liquidity of investments.
7

When investors purchase a commodity, they believe

A
the investors' employer will match the cost.
B
the commodity is guaranteed to make them money.
C
the bank will pay interest to the investors.
D
the commodity's price will go up after purchase.
8

Which statements apply to a certificate of deposit (CD)? Choose two correct answers.

A
It is always purchased as a long-term investment.
B
It can be purchased for almost any amount.
C
It is purchased through an individual's employer.
D
It is always purchased as a short-term investment.
E
It can be purchased from a banking institution.
9

Which investment has the least liquidity?

A
small business
B
checking account
C
house
D
mutual fund
10

Which investment is best for someone who is likely to need cash soon?

A
CD
B
savings account
C
mutual fund
D
401(k)

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