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Personal Finance Basics

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Questions and Answers

What is a stock?

A share of a company's profits
A type of bond
A share of a company's ownership (correct)
A type of mutual fund

What is the benefit of a well-diversified index fund?

It reduces the risk of losses due to stock market fluctuations (correct)
It provides a guaranteed return on investment
It allows you to invest in a single company
It allows you to actively manage your investments

What is the main difference between individual stocks and index funds?

Index funds are only available for long-term investments
Index funds are only available for short-term investments
Individual stocks are more expensive
Individual stocks involve buying and selling individual companies (correct)

What is the purpose of government bonds in a portfolio?

To diversify and reduce risk (C) Signup and view all the answers

What happens when a government bond reaches its maturity date?

You can collect your original investment and interest (D) Signup and view all the answers

What is the primary benefit of having a savings account?

To build up an emergency fund for unexpected expenses (A) Signup and view all the answers

What happens if you withdraw your money from a Certificate of Deposit before the term is up?

You are charged a penalty (B) Signup and view all the answers

What is the main difference between a savings account and a Certificate of Deposit?

A CD has a fixed interest rate for a fixed period (A) Signup and view all the answers

Why is a savings account ideal for unexpected expenses?

It provides a safe place to store money for emergency situations (A) Signup and view all the answers

What determines the interest rate of a Certificate of Deposit?

The length of the term (D) Signup and view all the answers

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