Financial Instruments Quiz
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Financial Instruments Quiz

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@FreshSnail6792

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Questions and Answers

What defines a Certificate of Deposit (CD)?

  • An investment account that allows daily withdrawals without penalties.
  • A type of mutual fund that pools money for high-risk stocks.
  • A government-issued bond that funds private projects.
  • An account that holds a fixed amount of money for a set period, in exchange for interest. (correct)
  • What is a Municipal Bond primarily used for?

  • To fund local projects by local governments. (correct)
  • To raise capital for corporate expansions.
  • To secure loans from private investors at high interest.
  • To provide dividends to shareholders annually.
  • What are dividends?

  • Interest earned from a savings account.
  • The capital gained from selling an asset at a higher price.
  • Loans taken by corporations from investors.
  • Payments made to shareholders from a company's profits. (correct)
  • What is the primary function of a 401(k)?

    <p>To allow tax-free savings for retirement through payroll deductions.</p> Signup and view all the answers

    What is meant by Capital Gains?

    <p>A profit from the sale of property or an investment.</p> Signup and view all the answers

    Study Notes

    Certificate of Deposit (CD)

    • Fixed sum of money held for a specific time period
    • Earns interest

    Municipal Bond

    • Issued by local, county, or state governments
    • Funds local projects
    • Not taxed at the federal level

    Stock

    • Represents ownership in a company
    • Gives the owner a claim to the company’s assets and earnings

    Bond

    • Loan from an investor to a borrower (government, corporation, or municipality)
    • Repaid with interest after a specified period

    Dividends

    • Regular payments (typically quarterly) made by a company to shareholders
    • Paid from profits or reserves

    401(k)

    • Retirement savings plan
    • Employees contribute and invest a portion of their paycheck tax-free

    Capital Gains

    • Profit from selling property or an investment

    Mutual Fund

    • Pool of money from multiple investors
    • Used to buy stocks, bonds, and other investments
    • Managed by professionals who choose investments

    Savings Account

    • Holds money not intended for immediate spending
    • Earns moderate interest
    • Money can be withdrawn at any time

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    Description

    Test your knowledge on various financial instruments including certificates of deposit, municipal bonds, stocks, and more. This quiz covers essential concepts that are crucial for understanding personal finance and investing. Perfect for students and anyone interested in finance!

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