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What is the relationship between risk and return?

A
A lower risk will always mean a lower return.
B
A higher risk often means a higher return.
C
A higher risk often means a lower return.
D
A lower risk always means a higher return.
2
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What is the definition of liquidity?

A
how much money someone has in a savings account
B
how easily an investment can be exchanged for cash
C
how much income someone has to invest each year
D
how difficult it is to maximize returns on investments
3

Which investment has the least liquidity?

A
checking account
B
small business
C
house
D
mutual fund
4

When investors purchase a commodity, they believe

A
the bank will pay interest to the investors.
B
the investors' employer will match the cost.
C
the commodity is guaranteed to make them money.
D
the commodity's price will go up after purchase.
5

A high-risk investment is characterized by

A
lower interest and compound interest rates.
B
a smaller percentage chance of loss.
C
a greater percentage chance of loss.
D
superior prospects for short-term gains.
6

Someone who diversifies investments is more likely to

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

What might convince an investor to buy stock or mutual funds?

A
belief that a company has just reached its peak popularity
B
news that a stock's price has recently increased significantly
C
belief that a small number of investors have bought the stock so far
D
news that a company is about to release a promising product
8

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

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

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

A
savings account
B
mutual fund
C
CD
D
401(k)
10

What is the definition of risk?

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

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