01
Choose one
1 point
Which statement best describes a retirement account such as an IRA?
Free Practice Quiz Question List
07 Investing Basics Online Quiz Questions
Use this free practice quiz with 20 questions to review 07 Investing Basics, test your knowledge, and prepare for your next test or exam.
20 questions
02
True or false
1 point
Spreading investments across different companies and asset classes eliminates the possibility of market losses.
- A
True
- B
False
03
Choose one
1 point
Someone expects to use their savings for a major expense in a few months. Which approach best reflects the guidance on time horizon?
- A
Put it in a stock investment because stocks always recover quickly.
- B
Choose a long-term bond fund because it cannot lose value.
- C
Keep it in safer, accessible savings suited to a short time horizon.
- D
Invest it in whichever asset has the highest potential return.
04
Written response
1 point
A company that issued a bond may fail to repay it. What is this type of bond risk called?
05
Choose one
1 point
A fund holds shares in many companies, but all of them are in the same industry. Which conclusion is best supported?
- A
It may remain concentrated because many holdings share the same industry risks.
- B
It must be broadly diversified because it holds multiple companies.
- C
It cannot lose value because the holdings are pooled.
- D
It is equivalent to holding cash because it contains many securities.
06
Choose one
1 point
An investor's portfolio has drifted away from its planned mix of stocks and bonds. What is the process of adjusting the holdings back toward that plan called?
- A
Diversifying
- B
Dollar-cost averaging
- C
Compounding
- D
Rebalancing
07
Written response
1 point
What investing term describes earnings remaining invested so they can themselves earn returns over time?
08
Choose one
1 point
Two funds have identical holdings and investment performance before costs. What is the likely effect of one fund having higher fees and expenses?
- A
They guarantee the fund will earn a higher return.
- B
They affect only the fund company, not investors.
- C
They reduce the return that remains for investors.
- D
They eliminate the investment risks of the fund's holdings.
09
Choose one
1 point
Which statement correctly compares the usual trading process for mutual funds and ETFs?
- A
Mutual funds trade on an exchange throughout the day, while ETFs transact only once each business day.
- B
Mutual funds generally transact at a price calculated once each business day, while ETF shares trade on an exchange during the day.
- C
Both mutual funds and ETFs are priced only once each month.
- D
Both mutual funds and ETFs are guaranteed to hold a broad mix of investments.
10
True or false
1 point
Investing equal amounts at regular intervals guarantees a better result than investing a lump sum.
- A
True
- B
False
11
Choose one
1 point
Market interest rates rise after an investor buys a bond. Which outcome is consistent with the bond’s interest-rate risk?
- A
Existing bond prices generally rise because their interest payments become larger.
- B
Existing bond prices can fall as market interest rates rise.
- C
Bond prices cannot change after the bond is issued.
- D
Only stock prices respond to changes in interest rates.
12
Choose one
1 point
An investor buys a share, and over a period its price rises by $3 while it pays a $1 dividend. Ignoring costs and taxes, what is the investment’s return per share over that period?
- A
$1 per share
- B
$3 per share
- C
$4 per share
- D
$0 per share, because the dividend cancels the price increase
13
Choose all
1 point
Select all statements that correctly match an investment risk with its meaning.
- A
Market risk: the possibility that investment prices will fall.
- B
Inflation risk: the possibility that money’s purchasing power will decline.
- C
Market risk: the possibility that money’s purchasing power will decline.
- D
Liquidity risk: the possibility that an investment will be difficult or costly to sell when cash is needed.
14
Choose all
1 point
A beginner is preparing to invest. Select all actions that are consistent with the material’s practical safeguards.
- A
Keep accessible savings for emergencies.
- B
Invest money needed immediately so it has a chance to grow.
- C
Consider paying down expensive high-interest debt before taking substantial investment risk.
- D
Research an investment professional and verify their registration and background before handing over money.
15
True or false
1 point
True or false: Taking greater investment risk guarantees that an investor will earn a higher return.
- A
True
- B
False
16
Written response
1 point
A saver’s money buys less over time because prices have risen. What investment risk describes the possibility that money’s purchasing power will decline?
17
Written response
1 point
An investor wants to describe an investment’s overall gain or loss, including price changes and any income it pays. What is this measure called?
18
Fill in the blank
1 point
Complete the statement: A share of stock represents ownership in a .
19
Fill in the blank
1 point
Complete the statement: Savings deposits, money market funds, and short-term government securities are examples of .
20
Open ended
1 point
A beginner is offered an investment they cannot explain. The salesperson promises a high, certain return and urges them to invest immediately. What should the beginner do, and why?