Investing Questions And Answers Graded A+ 2024.
How does investing in the stock market differ from putting money in a savings account at a bank?
a) Investing is always a less risky option than saving
b)Investing is best for short-term situations like emergency funds; saving is best f...
How does investing in the stock market differ from putting money in a savings account
at a bank?
a) Investing is always a less risky option than saving
b)Investing is best for short-term situations like emergency funds; saving is best for the
long-term
c) Investing typically earns between 1-2% while saving generally earns between 5-7%
d)Investing allows you to accumulate wealth for retirement while saving is best for short-
term purchases or emergencies - correct answer. d)
Why is compound interest more advantageous than simple interest?
a)Compound interest is harder to calculate, so those who use it earn higher profits for
their efforts
b) Compound interest means you have a fund manager who is compounding your
returns without charging a fee
c) Compound interest allows you to earn interest not only on the amount you have
saved, but also on the interest you've already earned
d)Compound interest has lower fees than simple interest - correct answer. c)
What kinds of cognitive biases and behaviors can prevent people from making smart
investing decisions?
a) Staying calm when the market is experiencing a downturn.
b) Buying stocks when prices are low and selling them when they're high
c) Exiting the market because that's what everyone else is doing
d) Investing in a diversified portfolio instead of trying to time the market - correct
answer. c)
Your friend Jenny wants to use a robo-adviser to manage her portfolio. What does this
mean?
, a) She'll have a human fund manager with advanced technology manage her portfolio.
b) A computer software system is going to adjust her portfolio based on her
preferences.
c) Jenny will sit down for quarterly investment meetings with a robot.
d) Jenny can receive investing advice through an online chat service provided through
the brokerage firm. - correct answer. b)
When investing in individual stocks, you should expect that...
a) Stock prices for a company are relatively easy to predict
b) Unforeseen company events can have a dramatic impact on the stock price for a
company
c) You will have an informational edge by reading an article about a company you want
to invest in
d) Stock prices for an individual stock will be more stable over the long-term than prices
for a diversified index fund - correct answer. b)
Which of the following statements about Exchange Traded Funds (ETFs) is TRUE?
a) ETFs are traded once a day after the market closes.
b) An ETF is a single stock that you can buy in the stock market.
c) Actively managed ETFs have very low fees.
d) ETF prices can change throughout the day as they are exchanged on the market. -
correct answer. d)
You bought 10 shares of stock in StreamingVideoCo for $45 per share. Two months
later you sold the 10 shares of stock for $80 per share. What was your profit or loss on
StreamingVideoCo stock? (Assume that StreamingVideoCo didn't pay a dividend and
that you didn't incur any trading fees during that period.)
a) Loss of $800
b) Gain of $350
c) Loss of $450
d) Gain of $800 - correct answer. b)
Which of the statements below BEST describes the relationship between risk and return
when considering an investment?
a) Investors expect to earn a lower return when they invest in a risky asset
b) Investors expect to earn a higher return when they invest in a low risk asset, like a
bond
c) Investors expect to earn a higher return when they invest in a high risk asset like
stock in a small company
d) Investors do not expect to earn a return on a high risk investment but rather expect to
lose their money - correct answer. c)
Why is diversification a recommended investment strategy?
a) Investing in a diversified portfolio guarantees that you won't lose money with your
investments.
b) If you tell your fund manager to use diversification, they'll charge you lower fees.
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