Copy of Unit 3 Investment Test (5/21/2025)

Last updated 3 months ago

45 questions

Instructions

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Required

1

Jordan is reviewing her financial assets and wants to understand how easily she can access her funds in case of an emergency. She asks her financial advisor which measure tells her how quickly her investments can be turned into cash without losing value.
Which financial term is her advisor most likely referring to?

Liquidity

Illiquid

Collateral

Equity

Victoria recently set aside money in a separate savings account labeled “Emergency Fund.” She wants to be financially prepared for the unexpected.
What is the primary purpose of Victoria’s emergency fund?

It is for her to use to pay for unexpected expenses like medical bills or car repairs.

It is for her to use for vacations and luxury purchases.

To invest in the stock market.

It is for her to use for retirement.

Hunter invested $1,000 and discovered that, at an 8% interest rate, his money would double in approximately 9 years. He didn’t use a calculator—just a simple mental shortcut.
What method did Hunter most likely use to figure this out?

Simple Interest Formula

Compound Interest Formula

Future Value Formula

Rule of 72 Formula

Alexa started a job at Scheels, a FOR PROFIT ORGANIZATION, and was offered a retirement plan. What is the name of the retirement plan offered by her employer?

403(b) Plan

IRA Plan

529 Plan

401(k) Plan

Nick and Kia both invested in their company's 401(k) plan. What statement is true about Nick and Kia investment decision?

Their contributions are taxed immediately and can’t grow over time.

They can access their money at any time without penalties.

The employer's match will not make a difference on Nick and Kia's investment,

They are taking advantage of a retirement savings plan that may include employer matching and tax benefits.

Amira is interested in investing in the stock market but isn’t sure how to get started. She decides to work with a professional through a brokerage firm to help her buy stocks and make informed investment decisions.
Which type of professional should Amira hire?

Accountant

Loan Officer

Stockbroker

Real Estate Agent

Jamal is a high school student who wants to start managing his money more wisely. He sets a goal to save up enough money within the next few months to buy a new laptop for school.
Which type of goal is Jamal setting?

A long-term goal

A short-term goal

A career development goal

A medium-term goal

Mr. Thompson is preparing to retire next year after working for over 30 years. As he reviews his finances, he considers how his expenses and income might change once he stops working full-time.
Which of the following will most likely happen during Mr. Thompson’s retirement? (Select all answers that apply) Hint: select 4 answers

Some of his costs such as groceries and utilities will stay about the same.

His costs related to working will be eliminated.

The costs of his medical care and prescriptions may increase significantly.

He will rely more on savings, pensions, or Social Security instead of a regular paycheck.

His income will increase due to bonuses and raises.

His financial responsibilities will completely disappear.

He will begin earning a salary from a new full-time job.

Lena has money invested in a savings account that earns a small amount of interest each year. Recently, she noticed that the prices of groceries, gas, and other everyday items have been rising quickly. Despite earning interest, her money doesn’t seem to stretch as far as it used to.
What is Lena experiencing?

stock risk

inflation risk

industry risk

political risk

Caleb contributes regularly to his Individual Retirement Account (IRA), which is tax-deferred. He’s trying to understand how this affects his taxes.
What does it mean that Caleb’s IRA is tax-deferred?

He pays taxes on the money before he contributes it.

He will pay taxes on the money when he withdraws it during retirement.

It means that he doesn’t have to pay taxes on the interest earned.

He pays taxes on the money as it earns interest each year.

Ben has just secured his first job, and has the opportunity to invest in several different types of investments. He has chosen to “spread his assets out over several different investments” to reduce his risk of loss. What concept has he applied?

He has applied dollar-cost averaging.

He has applied contingencies.

He has applied diversification.

He has applied inflation risk.

Wyatt owns stock in a telecommunications company. Recently, he received a payment from the company that represents a share of its profits. He's excited because it's a return on his investment.
What did Wyatt receive?

A dividend

A capital gain

A bonus

A commission

Todd has an investment portfolio. He has closely examined each of his investments and calculated his return on investment (ROI). What does the ROI tell him about his investments?

It tells the investor how much they will have to pay in taxes.

It tells the investor how much money they need to spend.

It tells the investor how much money they owe.

It tells the investor how much their investment as increased.

Arthur has implemented the “pay yourself first” strategy as part of his budget planning. What is Arthur doing?

He is charging as much as possible on his credit cards.

He is spending his money frivolously.

He is setting money aside for savings before he pays his bills.

He is saving as little money as possible.

Alice has an investment that allows her to have DIVERSIFIED holdings with the ONE INVESTMENT. What type of investment does she have?

She has a speculative investment.

She has a mutual fund.

She has a conservative investment.

She has a growth stock.

Gerald likes to invest in the stock market. His current investments in the stock market have not been performing very well, but he has been able to pick up many stocks for cheap prices. What type of market condition is he experiencing?

bull market

economic market

bear market

financial market

Trey has invested in several tax-exempt bonds as part of his financial strategy. He’s reviewing how these investments impact his overall income.
What is the primary benefit of Trey’s tax-exempt investments?

It allows him to pay fees on his investments.

It allows him to pay more taxes.

He won’t have to pay taxes on the interest or earnings from them.

It allows him earn money that will be taxed later.

Bella would like to invest in an investment that would yield high earnings. She is not afraid to take risks. Which investment would allow her to earn lots of money, but carry a high risk? (Top of the risk pyramid)

investing in the stock market

Investing in Speculative Investment

certificate of deposits

savings accounts and low-yield bonds

Jane has an investment portfolio. She wants to ensure that it will continue to grow for her retirement. Which of the characteristics should she be sure that her portfolio meets?

It should have a strong foundation of safe investments and be diversified.

It should include high-risk investments all together.

It should be based solely on her favorite stocks.

It should concentrate on a single industry.

Lucy has been dabbling in the stock market since she graduated from college. She hasn’t always had the best returns on her stocks, but lately things have been very profitable and she has made large profits on her stock ventures. What type of financial market is she experiencing lately?

financial market

bull market

economic market

bear market

Jorge is a junior in high school. His baseball team has been recognized as the best in the state, which has earned the team a chance to take a trip to visit the Minnesota Twins, and attend some training clinics with the Twins. he will need $2,000 for the trip. His parents are offering to pay for half of the trip, and the school will contribute $500 for the cost of the trip. Jorge will need to come up with the remaining $500. Which of the following assets would be the most liquid?

His baseball card collection

His Certificate of Deposit (CD)

His U.S. Savings Bond

His Savings Account

Ella has an IRA (Individual Retirement Account). What is the purpose of an IRA? Ella recently opened an Individual Retirement Account (IRA) and started making regular contributions to it. She wants to make sure she’s planning wisely for her financial future.
What is the main purpose of Ella’s IRA?

It is an account that allows for her money to be pooled together for purchases.

To invest for long-term retirement savings with potential tax advantages.

To pay off short-term debt quickly.

It is an account that allows for her money to be pledged for CDs (Certificate of Deposit).

Brian is a nurse. He works for a NONPROFIT hospital. As an employee of the hospital, he can contribute to an employer sponsored retirement plan. Which retirement plan would his company be using?

401(k) Plan

Keogh Plan

Roth IRA Plan

403(b) Plan

Miska is interested in investing in several stocks. He has downloaded a copy of the annual report from each of the company's websites. What is an annual report?

It is a company's report on its sales returns.

It is a company's report on the theft of its products.

It is a company's report about the company's financial condition to shareholders.

It is a company's report on its insurance payments.

Evan and Kira file their taxes every year. Which agency has the responsibility of collecting their taxes? (Review Question from unit 2)

The department of Treasury

The Federal Trade Commission (FTC)

The Internal revenue Service (IRS)

The Securities and Exchange Commision (SEC)

Carlos recently began investing in the stock market. He’s learning about the different ways people can earn money through their stock investments.
Which of the following is a way Carlos could make money from stocks?

Selling the stock for a lower price than originally purchased for.

Charging companies a fee for holding their stock.

Receiving dividends or selling the stocks for more than he paid.

Paying interest on the stocks he owns.

Maya recently purchased shares in a publicly held company through the stock market. She now owns a small portion of that company and is excited to see how her investment performs.
What is Maya’s ownership in the company called?

Commodity

Money market

Share of stock

Share of bond

The Thomas Car Wash is a private company but is in the process of becoming a publicly traded company. The owner of the company decided to offer his private company's stock to be publicly traded on the stock market exchange. What is it called when a company offers its stock to the public for the FIRST TIME to be traded on the stock market?

initial public offering (IPO)

market order

limit order

stock shares offering (SSI)

The city of Sioux Falls needs money to build a new baseball stadium. In order to do this, they decide to pursue loans from the citizens. What is this type of debt instrument (loan) issued by a corporation or government called?

stock

commodity

bond

futures contract

Sophia is deciding between two investment options: one offers a high potential return but comes with a greater chance of losing money, while the other is safer but has lower expected returns. She wants to understand how the level of risk affects what she might earn.
What best describes the relationship between investment risk and returns?

Investment risk and returns are not related.

The higher the risk, the lower the possible return or loss

Higher risk usually means higher potential returns, but also greater chance of loss.

The lower the risk, the greater the possible return or loss

Jasmine is deciding between two options for her extra money: putting it in a savings account at her bank or investing it in the stock market. She wants to understand the key differences between these choices.
How does investing in the stock market differ from saving money in a bank account?

Savings accounts usually earn more money than the stock market over time.

Investing in the stock market requires no knowledge, unlike savings accounts.

IMoney in the stock market is guaranteed by the government, but savings accounts are not.

Stock market investments typically offer higher potential returns but come with more risk, while savings accounts offer lower returns with more security

Emma is reviewing how her savings grow over time. She learns that her interest earnings are added back to her account balance, which then earns interest itself in the following periods.
Which of the following statements about compound interest is TRUE?

Compound interest directly impacts how much you will be charged in fees

Compound interest means you have a fund manager who is compounding your returns without charging a fee

Compound interest allows you to earn interest not only on the amount you have saved, but also on the interest you've already earned

Compound interest is difficult to calculate, so those who use it earn higher profits for their efforts

Jamie is deciding how to invest her money. She wonders if it’s better to invest all in one company or to spread her money across different types of investments like stocks, bonds, and real estate.
Why might Jamie choose to diversify her investments?

To reduce risk by not putting all her money into one investment.

Investing in a diversified portfolio guarantees that you won’t lose money with your investments

If you diversify your portfolio, you will definitely earn a high return

To avoid paying any taxes on her investments.

Liam is exploring different ways to invest his money. He learns about stocks and bonds but wants to understand the key differences between the two.
How is a bond different from a stock?

Bonds are usually issued by smaller startup companies while stocks are issued by well established organizations

A bond is a loan you give to an organization while a stock is partial ownership in a company

Bonds are typically riskier than stocks but have the potential to earn higher returns

Bonds are best for earning high returns while stocks are best for providing a stable source of income

Sophia is planning for her retirement and is trying to decide between opening a Roth IRA or a Traditional IRA. She wants to understand the key differences to make the best choice.
Which is an important question Sophia should ask when deciding between a Roth IRA and a Traditional IRA?

Do I want to take advantage of my employer’s matching contribution?

Do I prefer to pay taxes now or later on my retirement contributions and earnings?

Do I want to make a guaranteed return of 6% or 8%?

Do I want to take on more or less risk?

Sanjana is explaining what Social Security is to her younger brother. Which of the following descriptions should she use?Sanjana is talking to her younger brother about how people receive income after they retire. She wants to explain what Social Security means in a simple way.
Which of the following descriptions should Sanjana use to explain Social Security

A program that provides retirement, disability, and survivor benefits/income funded by payroll taxes.

Social Security is a type of retirement savings plan offered by some employers

Social Security is a type of retirement savings plan that you can open through a brokerage firm

Social security is a government mandate that requires employers to offer their employees a 401(k) or pension plan

Ty just got their first full-time job after high school and is deciding what to do with their paycheck. Their older cousin explains that if Ty starts saving even a small amount each month now, the money will grow much more by the time Ty is 40, compared to waiting until age 30 to start saving. Ty is surprised that starting earlier makes such a big difference, even though the amount saved each month is the same.
Question:What is the main reason Ty benefits more by starting to save earlier rather than waiting?

Because starting early allows more time for compound interest to grow their savings.

Because people who start saving early never have financial emergencies.

Because saving early means you don’t need to budget or plan for the future.

Because banks give higher interest rates to younger savers.

Jay decided to invest $800 in a small business project. After one year, Jay sold the investment for $950. Jay wants to figure out the annual return on investment (ROI) to see how much profit was made compared to the original amount invested.
Question:What is Jay’s annual return on investment (ROI)?

10%

15%

25%

18.75%

Avaian is interested in investing in the stock market but wants to make sure she works with a licensed and trustworthy financial planner. She learns that there is a government agency responsible for regulating the stock market, protecting investors, and ensuring that stockbrokers and financial planners follow the law.
Question:Which government agency is responsible for regulating the stock market and licensing stockbrokers and financial planners?

Federal Reserve (The Fed)

Internal Revenue Service (IRS)

Securities and Exchange Commission (SEC)

U.S. Department of Treasury

Landon wants to invest in a stock but is concerned that the price might drop after he invests a large sum all at once. Instead, he decides to invest $200 every two weeks into the same stock for a year. Some weeks the stock is expensive, so his $200 buys fewer shares. Other weeks the stock is cheaper, so his $200 buys more shares. Over time, Landon notices that his average purchase price per share is lower than if he had invested the entire amount at once.
Question: By investing a fixed amount regularly, Landon reduces the impact of short-term price fluctuations. This strategy is known as what?

Dollar-cost averaging

Systematic investing

Investment tracking

Market timing

Mary is 65 and wants to make sure that her house, savings, and other assets go to her children after she passes away. She meets with a financial planner who explains that without proper planning, the government could take a portion of her estate through taxes, and her children might face delays in receiving her property. Mary decides to create legal documents, like a will and a trust, to clearly outline who gets her property and assets.
Question: What process is Mary using to ensure her property and assets are transferred properly after her death?

Insurance underwriting

Estate planning

Retirement saving

Investment planning

Carl invests in a company that manufactures electric vehicles. After a few months, he notices that the stock price drops significantly. He learns that a competitor introduced a more advanced model and that new government regulations have increased production costs for the entire auto industry. Even though Carl’s company hasn’t done anything wrong, the stock still loses value because of changes in the industry as a whole.
Question: What type of risk caused Carl’s investment to lose value?

Stock risk

Jordan is reviewing her financial assets and wants to understand how easily she can access her funds in case of an emergency. She asks her financial advisor which measure tells her how quickly her investments can be turned into cash without losing value.
Which financial term is her advisor most likely referring to?

Liquidity

Illiquid

Collateral

Equity

Victoria recently set aside money in a separate savings account labeled “Emergency Fund.” She wants to be financially prepared for the unexpected.
What is the primary purpose of Victoria’s emergency fund?

It is for her to use to pay for unexpected expenses like medical bills or car repairs.

It is for her to use for vacations and luxury purchases.

To invest in the stock market.

It is for her to use for retirement.

Hunter invested $1,000 and discovered that, at an 8% interest rate, his money would double in approximately 9 years. He didn’t use a calculator—just a simple mental shortcut.
What method did Hunter most likely use to figure this out?

Simple Interest Formula

Compound Interest Formula

Future Value Formula

Rule of 72 Formula

Alexa started a job at Scheels, a FOR PROFIT ORGANIZATION, and was offered a retirement plan. What is the name of the retirement plan offered by her employer?

403(b) Plan

IRA Plan

529 Plan

401(k) Plan

Nick and Kia both invested in their company's 401(k) plan.  What statement is true about Nick and Kia investment decision?

Their contributions are taxed immediately and can’t grow over time.

They can access their money at any time without penalties.

The employer's match will not make a difference on Nick and Kia's investment,

They are taking advantage of a retirement savings plan that may include employer matching and tax benefits.

Amira is interested in investing in the stock market but isn’t sure how to get started. She decides to work with a professional through a brokerage firm to help her buy stocks and make informed investment decisions.
Which type of professional should Amira hire?

Accountant

Loan Officer

Stockbroker

Real Estate Agent

Jamal is a high school student who wants to start managing his money more wisely. He sets a goal to save up enough money within the next few months to buy a new laptop for school.
Which type of goal is Jamal setting?

A long-term goal

A short-term goal

A career development goal

A medium-term goal

Mr. Thompson is preparing to retire next year after working for over 30 years. As he reviews his finances, he considers how his expenses and income might change once he stops working full-time.
Which of the following will most likely happen during Mr. Thompson’s retirement? (Select all answers that apply) *Hint: select 4 answers*

Some of his costs such as groceries and utilities will stay about the same.

His costs related to working will be eliminated.

The costs of his medical care and prescriptions may increase significantly.

He will rely more on savings, pensions, or Social Security instead of a regular paycheck.

His income will increase due to bonuses and raises.

His financial responsibilities will completely disappear.

He will begin earning a salary from a new full-time job.

Lena has money invested in a savings account that earns a small amount of interest each year. Recently, she noticed that the prices of groceries, gas, and other everyday items have been rising quickly. Despite earning interest, her money doesn’t seem to stretch as far as it used to.
What is Lena experiencing?

stock risk

inflation risk

industry risk

political risk

Caleb contributes regularly to his Individual Retirement Account (IRA), which is tax-deferred. He’s trying to understand how this affects his taxes.
What does it mean that Caleb’s IRA is tax-deferred?

He pays taxes on the money before he contributes it.

He will pay taxes on the money when he withdraws it during retirement.

It means that he doesn’t have to pay taxes on the interest earned.

He pays taxes on the money as it earns interest each year.

Ben has just secured his first job, and has the opportunity to invest in several different types of investments. He has chosen to “spread his assets out over several different investments” to reduce his risk of loss.  What concept has he applied?

He has applied dollar-cost averaging.

He has applied contingencies.

He has applied diversification.

He has applied inflation risk.

Wyatt owns stock in a telecommunications company. Recently, he received a payment from the company that represents a share of its profits. He's excited because it's a return on his investment.
What did Wyatt receive?

A dividend

A capital gain

A bonus

A commission

Todd has an investment portfolio. He has closely examined each of his investments and calculated his return on investment (ROI). What does the ROI tell him about his investments?

It tells the investor how much they will have to pay in taxes.

It tells the investor how much money they need to spend.

It tells the investor how much money they owe.

It tells the investor how much their investment as increased.

Arthur has implemented the “pay yourself first” strategy as part of his budget planning. What is Arthur doing?

He is charging as much as possible on his credit cards.

He is spending his money frivolously.

He is setting money aside for savings before he pays his bills.

He is saving as little money as possible.

Alice has an investment that allows her to have DIVERSIFIED holdings with the ONE INVESTMENT. What type of investment does she have?

She has a speculative investment.

She has a mutual fund.

She has a conservative investment.

She has a growth stock.

Gerald likes to invest in the stock market. His current investments in the stock market have not been performing very well, but he has been able to pick up many stocks for cheap prices. What type of market condition is he experiencing?

bull market

economic market

bear market

financial market

Trey has invested in several tax-exempt bonds as part of his financial strategy. He’s reviewing how these investments impact his overall income.
What is the primary benefit of Trey’s tax-exempt investments?

It allows him to pay fees on his investments.

It allows him to pay more taxes.

He won’t have to pay taxes on the interest or earnings from them.

It allows him earn money that will be taxed later.

Bella would like to invest in an investment that would yield high earnings. She is not afraid to take risks. Which investment would allow her to earn lots of money, but carry a high risk? (Top of the risk pyramid)

investing in the stock market

Investing in Speculative Investment

certificate of deposits

savings accounts and low-yield bonds

Jane has an investment portfolio. She wants to ensure that it will continue to grow for her retirement. Which of the characteristics should she be sure that her portfolio meets?

It should have a strong foundation of safe investments and be diversified.

It should include high-risk investments all together.

It should be based solely on her favorite stocks.

It should concentrate on a single industry.

Lucy has been dabbling in the stock market since she graduated from college. She hasn’t always had the best returns on her stocks, but lately things have been very profitable and she has made large profits on her stock ventures. What type of financial market is she experiencing lately?

financial market

bull market

economic market

bear market

Jorge is a junior in high school.  His baseball team has been recognized as the best in the state, which has earned the team a chance to take a trip to visit the Minnesota Twins, and attend some training clinics with the Twins.  he will need $2,000 for the trip. His parents are offering to pay for half of the trip, and the school will contribute $500 for the cost of the trip.  Jorge will need to come up with the remaining $500. Which of the following assets would be the most liquid?

His baseball card collection

His Certificate of Deposit (CD)

His U.S. Savings Bond

His Savings Account

Ella has an IRA (Individual Retirement Account). What is the purpose of an IRA?  Ella recently opened an Individual Retirement Account (IRA) and started making regular contributions to it. She wants to make sure she’s planning wisely for her financial future.
What is the main purpose of Ella’s IRA?

It is an account that allows for her money to be pooled together for purchases.

To invest for long-term retirement savings with potential tax advantages.

To pay off short-term debt quickly.

It is an account that allows for her money to be pledged for CDs (Certificate of Deposit).

Brian is a nurse. He works for a NONPROFIT hospital. As an employee of the hospital, he can contribute to an employer sponsored retirement plan. Which retirement plan would his company be using?

401(k) Plan

Keogh Plan

Roth IRA Plan

403(b) Plan

Miska is interested in investing in several stocks. He has downloaded a copy of the annual report from each of the company's websites. What is an annual report?

It is a company's report on its sales returns.

It is a company's report on the theft of its products.

It is a company's report about the company's financial condition to shareholders.

It is a company's report on its insurance payments.

Evan and Kira file their taxes every year. Which agency has the responsibility of collecting their taxes? (Review Question from unit 2)

The department of Treasury

The Federal Trade Commission (FTC)

The Internal revenue Service (IRS)

The Securities and Exchange Commision (SEC)

Carlos recently began investing in the stock market. He’s learning about the different ways people can earn money through their stock investments.
Which of the following is a way Carlos could make money from stocks?

Selling the stock for a lower price than originally purchased for.

Charging companies a fee for holding their stock.

Receiving dividends or selling the stocks for more than he paid.

Paying interest on the stocks he owns.

Maya recently purchased shares in a publicly held company through the stock market. She now owns a small portion of that company and is excited to see how her investment performs.
What is Maya’s ownership in the company called?

Commodity

Money market

Share of stock

Share of bond

The Thomas Car Wash is a private company but is in the process of becoming a publicly traded company.  The owner of the company decided to offer his private company's stock to be publicly traded on the stock market exchange.  What is it called when a company offers its stock to the public for the FIRST TIME to be traded on the stock market?

initial public offering (IPO)

market order

limit order

stock shares offering (SSI)

The city of Sioux Falls needs money to build a new baseball stadium.  In order to do this, they decide to pursue loans from the citizens. What is this type of debt instrument (loan) issued by a corporation or government called?

stock

commodity

bond

futures contract

Sophia is deciding between two investment options: one offers a high potential return but comes with a greater chance of losing money, while the other is safer but has lower expected returns. She wants to understand how the level of risk affects what she might earn.
What best describes the relationship between investment risk and returns?

Investment risk and returns are not related.

The higher the risk, the lower the possible return or loss

Higher risk usually means higher potential returns, but also greater chance of loss.

The lower the risk, the greater the possible return or loss

Jasmine is deciding between two options for her extra money: putting it in a savings account at her bank or investing it in the stock market. She wants to understand the key differences between these choices.
How does investing in the stock market differ from saving money in a bank account?

Savings accounts usually earn more money than the stock market over time.

Investing in the stock market requires no knowledge, unlike savings accounts.

IMoney in the stock market is guaranteed by the government, but savings accounts are not.

Stock market investments typically offer higher potential returns but come with more risk, while savings accounts offer lower returns with more security

Emma is reviewing how her savings grow over time. She learns that her interest earnings are added back to her account balance, which then earns interest itself in the following periods.
Which of the following statements about compound interest is TRUE?

Compound interest directly impacts how much you will be charged in fees

Compound interest means you have a fund manager who is compounding your returns without charging a fee

Compound interest allows you to earn interest not only on the amount you have saved, but also on the interest you've already earned

Compound interest is difficult to calculate, so those who use it earn higher profits for their efforts

Jamie is deciding how to invest her money. She wonders if it’s better to invest all in one company or to spread her money across different types of investments like stocks, bonds, and real estate.
Why might Jamie choose to diversify her investments?

To reduce risk by not putting all her money into one investment.

Investing in a diversified portfolio guarantees that you won’t lose money with your investments

If you diversify your portfolio, you will definitely earn a high return

To avoid paying any taxes on her investments.

Liam is exploring different ways to invest his money. He learns about stocks and bonds but wants to understand the key differences between the two.
How is a bond different from a stock?

Bonds are usually issued by smaller startup companies while stocks are issued by well established organizations

A bond is a loan you give to an organization while a stock is partial ownership in a company

Bonds are typically riskier than stocks but have the potential to earn higher returns

Bonds are best for earning high returns while stocks are best for providing a stable source of income

Sophia is planning for her retirement and is trying to decide between opening a Roth IRA or a Traditional IRA. She wants to understand the key differences to make the best choice.
Which is an important question Sophia should ask when deciding between a Roth IRA and a Traditional IRA?

Do I want to take advantage of my employer’s matching contribution?

Do I prefer to pay taxes now or later on my retirement contributions and earnings?

Do I want to make a guaranteed return of 6% or 8%?

Do I want to take on more or less risk?

Sanjana is explaining what Social Security is to her younger brother. Which of the following descriptions should she use?Sanjana is talking to her younger brother about how people receive income after they retire. She wants to explain what Social Security means in a simple way.
Which of the following descriptions should Sanjana use to explain Social Security

A program that provides retirement, disability, and survivor benefits/income funded by payroll taxes.

Social Security is a type of retirement savings plan offered by some employers

Social Security is a type of retirement savings plan that you can open through a brokerage firm

Social security is a government mandate that requires employers to offer their employees a 401(k) or pension plan

Ty just got their first full-time job after high school and is deciding what to do with their paycheck. Their older cousin explains that if Ty starts saving even a small amount each month now, the money will grow much more by the time Ty is 40, compared to waiting until age 30 to start saving. Ty is surprised that starting earlier makes such a big difference, even though the amount saved each month is the same.
Question:What is the main reason Ty benefits more by starting to save earlier rather than waiting?

Because starting early allows more time for compound interest to grow their savings.

Because people who start saving early never have financial emergencies.

Because saving early means you don’t need to budget or plan for the future.

Because banks give higher interest rates to younger savers.

Jay decided to invest $800 in a small business project. After one year, Jay sold the investment for $950. Jay wants to figure out the annual return on investment (ROI) to see how much profit was made compared to the original amount invested.
Question:What is Jay’s annual return on investment (ROI)?

10%

15%

25%

18.75%

Avaian is interested in investing in the stock market but wants to make sure she works with a licensed and trustworthy financial planner. She learns that there is a government agency responsible for regulating the stock market, protecting investors, and ensuring that stockbrokers and financial planners follow the law.
Question:Which government agency is responsible for regulating the stock market and licensing stockbrokers and financial planners?

Federal Reserve (The Fed)

Internal Revenue Service (IRS)

Securities and Exchange Commission (SEC)

U.S. Department of Treasury

Landon wants to invest in a stock but is concerned that the price might drop after he invests a large sum all at once. Instead, he decides to invest $200 every two weeks into the same stock for a year. Some weeks the stock is expensive, so his $200 buys fewer shares. Other weeks the stock is cheaper, so his $200 buys more shares. Over time, Landon notices that his average purchase price per share is lower than if he had invested the entire amount at once.
Question: By investing a fixed amount regularly, Landon reduces the impact of short-term price fluctuations. This strategy is known as what?

Dollar-cost averaging

Systematic investing

Investment tracking

Market timing

Mary is 65 and wants to make sure that her house, savings, and other assets go to her children after she passes away. She meets with a financial planner who explains that without proper planning, the government could take a portion of her estate through taxes, and her children might face delays in receiving her property. Mary decides to create legal documents, like a will and a trust, to clearly outline who gets her property and assets.
Question: What process is Mary using to ensure her property and assets are transferred properly after her death?

Insurance underwriting

Estate planning

Retirement saving

Investment planning

Carl invests in a company that manufactures electric vehicles. After a few months, he notices that the stock price drops significantly. He learns that a competitor introduced a more advanced model and that new government regulations have increased production costs for the entire auto industry. Even though Carl’s company hasn’t done anything wrong, the stock still loses value because of changes in the industry as a whole.
Question: What type of risk caused Carl’s investment to lose value?

Stock risk

Inflation risk

Industry risk

Political risk

Emily buys shares of a tech startup. A few weeks later, the company announces that its latest product failed safety tests, and profits are expected to drop. As a result, the stock price falls sharply. This drop happens even though the overall stock market is performing well.
Question:What type of risk caused Emily’s stock to decrease in value?

Industry risk

Political risk

Stock risk

Inflation risk

Jordy wants to start investing but isn’t sure how to reduce risk while still aiming for good returns. Their financial advisor explains that instead of putting all money into one stock, Jordy should spread investments across different types of assets, like stocks, bonds, and real estate, and even within stocks, across different industries. This way, if one investment performs poorly, others may perform well to balance the overall portfolio.
Question: What should Jordy’s investment portfolio include to reduce risk and aim for steady growth?

Only one type of stock to maximize returns

A mix of different assets, industries, and investment types, and a strong foundation of safe investments

Only bonds because they are safe

Only real estate to avoid market fluctuations

Sofia wants to invest in a popular tech stock. She waits for what she believes is the “perfect time” to buy, hoping the stock price will drop. However, the stock price keeps rising, and when she finally invests, it has already increased significantly. Her friend, who invested steadily over several months regardless of price, ends up with better returns.
Question:What lesson does Sofia’s situation illustrate about investing in stocks using a market timing strategy?

Market timing is a reliable way to guarantee profits.

Investing in tech stocks is safer than investing in other industries.

Stocks always go up over time, so timing doesn’t matter.

Trying to predict the best time to buy and sell can be risky; consistent investing is often more effective.

Copy of Unit 3 Investment Test (5/21/2025)

Copy of Unit 3 Investment Test (5/21/2025)

Victoria recently set aside money in a separate savings account labeled “Emergency Fund.” She wants to be financially prepared for the unexpected.What is the primary purpose of Victoria’s emergency fund?

Hunter invested $1,000 and discovered that, at an 8% interest rate, his money would double in approximately 9 years. He didn’t use a calculator—just a simple mental shortcut.What method did Hunter most likely use to figure this out?

Alexa started a job at Scheels, a FOR PROFIT ORGANIZATION, and was offered a retirement plan. What is the name of the retirement plan offered by her employer?

Nick and Kia both invested in their company's 401(k) plan. What statement is true about Nick and Kia investment decision?

Amira is interested in investing in the stock market but isn’t sure how to get started. She decides to work with a professional through a brokerage firm to help her buy stocks and make informed investment decisions.Which type of professional should Amira hire?

Jamal is a high school student who wants to start managing his money more wisely. He sets a goal to save up enough money within the next few months to buy a new laptop for school.Which type of goal is Jamal setting?

Caleb contributes regularly to his Individual Retirement Account (IRA), which is tax-deferred. He’s trying to understand how this affects his taxes.What does it mean that Caleb’s IRA is tax-deferred?

Ben has just secured his first job, and has the opportunity to invest in several different types of investments. He has chosen to “spread his assets out over several different investments” to reduce his risk of loss. What concept has he applied?

Wyatt owns stock in a telecommunications company. Recently, he received a payment from the company that represents a share of its profits. He's excited because it's a return on his investment.What did Wyatt receive?

Todd has an investment portfolio. He has closely examined each of his investments and calculated his return on investment (ROI). What does the ROI tell him about his investments?

Arthur has implemented the “pay yourself first” strategy as part of his budget planning. What is Arthur doing?

Alice has an investment that allows her to have DIVERSIFIED holdings with the ONE INVESTMENT. What type of investment does she have?

Gerald likes to invest in the stock market. His current investments in the stock market have not been performing very well, but he has been able to pick up many stocks for cheap prices. What type of market condition is he experiencing?

Trey has invested in several tax-exempt bonds as part of his financial strategy. He’s reviewing how these investments impact his overall income.What is the primary benefit of Trey’s tax-exempt investments?

Bella would like to invest in an investment that would yield high earnings. She is not afraid to take risks. Which investment would allow her to earn lots of money, but carry a high risk? (Top of the risk pyramid)

Jane has an investment portfolio. She wants to ensure that it will continue to grow for her retirement. Which of the characteristics should she be sure that her portfolio meets?

Lucy has been dabbling in the stock market since she graduated from college. She hasn’t always had the best returns on her stocks, but lately things have been very profitable and she has made large profits on her stock ventures. What type of financial market is she experiencing lately?

Brian is a nurse. He works for a NONPROFIT hospital. As an employee of the hospital, he can contribute to an employer sponsored retirement plan. Which retirement plan would his company be using?

Miska is interested in investing in several stocks. He has downloaded a copy of the annual report from each of the company's websites. What is an annual report?

Evan and Kira file their taxes every year. Which agency has the responsibility of collecting their taxes? (Review Question from unit 2)

Carlos recently began investing in the stock market. He’s learning about the different ways people can earn money through their stock investments.Which of the following is a way Carlos could make money from stocks?

Maya recently purchased shares in a publicly held company through the stock market. She now owns a small portion of that company and is excited to see how her investment performs.What is Maya’s ownership in the company called?

The city of Sioux Falls needs money to build a new baseball stadium. In order to do this, they decide to pursue loans from the citizens. What is this type of debt instrument (loan) issued by a corporation or government called?

Jasmine is deciding between two options for her extra money: putting it in a savings account at her bank or investing it in the stock market. She wants to understand the key differences between these choices.How does investing in the stock market differ from saving money in a bank account?

Emma is reviewing how her savings grow over time. She learns that her interest earnings are added back to her account balance, which then earns interest itself in the following periods.Which of the following statements about compound interest is TRUE?

Jamie is deciding how to invest her money. She wonders if it’s better to invest all in one company or to spread her money across different types of investments like stocks, bonds, and real estate.Why might Jamie choose to diversify her investments?

Liam is exploring different ways to invest his money. He learns about stocks and bonds but wants to understand the key differences between the two.How is a bond different from a stock?

Sophia is planning for her retirement and is trying to decide between opening a Roth IRA or a Traditional IRA. She wants to understand the key differences to make the best choice.Which is an important question Sophia should ask when deciding between a Roth IRA and a Traditional IRA?

Victoria recently set aside money in a separate savings account labeled “Emergency Fund.” She wants to be financially prepared for the unexpected.
What is the primary purpose of Victoria’s emergency fund?

Hunter invested $1,000 and discovered that, at an 8% interest rate, his money would double in approximately 9 years. He didn’t use a calculator—just a simple mental shortcut.
What method did Hunter most likely use to figure this out?

Amira is interested in investing in the stock market but isn’t sure how to get started. She decides to work with a professional through a brokerage firm to help her buy stocks and make informed investment decisions.
Which type of professional should Amira hire?

Jamal is a high school student who wants to start managing his money more wisely. He sets a goal to save up enough money within the next few months to buy a new laptop for school.
Which type of goal is Jamal setting?

Caleb contributes regularly to his Individual Retirement Account (IRA), which is tax-deferred. He’s trying to understand how this affects his taxes.
What does it mean that Caleb’s IRA is tax-deferred?

Wyatt owns stock in a telecommunications company. Recently, he received a payment from the company that represents a share of its profits. He's excited because it's a return on his investment.
What did Wyatt receive?

Trey has invested in several tax-exempt bonds as part of his financial strategy. He’s reviewing how these investments impact his overall income.
What is the primary benefit of Trey’s tax-exempt investments?

Carlos recently began investing in the stock market. He’s learning about the different ways people can earn money through their stock investments.
Which of the following is a way Carlos could make money from stocks?

Maya recently purchased shares in a publicly held company through the stock market. She now owns a small portion of that company and is excited to see how her investment performs.
What is Maya’s ownership in the company called?

Jasmine is deciding between two options for her extra money: putting it in a savings account at her bank or investing it in the stock market. She wants to understand the key differences between these choices.
How does investing in the stock market differ from saving money in a bank account?

Emma is reviewing how her savings grow over time. She learns that her interest earnings are added back to her account balance, which then earns interest itself in the following periods.
Which of the following statements about compound interest is TRUE?

Jamie is deciding how to invest her money. She wonders if it’s better to invest all in one company or to spread her money across different types of investments like stocks, bonds, and real estate.
Why might Jamie choose to diversify her investments?

Liam is exploring different ways to invest his money. He learns about stocks and bonds but wants to understand the key differences between the two.
How is a bond different from a stock?

Sophia is planning for her retirement and is trying to decide between opening a Roth IRA or a Traditional IRA. She wants to understand the key differences to make the best choice.
Which is an important question Sophia should ask when deciding between a Roth IRA and a Traditional IRA?