Saving vs
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Questions and Answers

Which of the following best describes the difference between saving and investing?

  • Saving is for short-term goals while investing is for long-term goals. (correct)
  • Saving is about increasing wealth while investing is about paying for short-term goals.
  • Saving is low-risk while investing is high-risk.
  • Saving is liquid and safe while investing is less liquid and higher risk.

    • What is risk tolerance?

  • The possibility of a negative financial outcome.
  • The return on an investment.
  • The difference between saving and investing.
  • The amount of money you can afford to lose in an investment. (correct)

    • Why is investing considered higher risk compared to saving?

  • Investing is less liquid. (correct)
  • Investing is safer than saving.
  • Investing is for short-term goals.
  • Investing has higher returns.

    • Which of the following is the correct definition of risk-free return?

    <p>The return on an investment with zero risk</p> Signup and view all the answers

    What is the formula for market risk premium?

    <p>Expected market return - risk-free rate</p> Signup and view all the answers

    How can risk be managed in investing?

    <p>Through asset allocation and diversification</p> Signup and view all the answers

    Which of the following best describes the relationship between risk and return in investing?

    <p>Risk and return always move in the same direction</p> Signup and view all the answers

    What is the main purpose of asset allocation in managing risk?

    <p>To determine the percentage of assets to invest in different asset classes</p> Signup and view all the answers

    Which of the following is NOT one of the risk tolerance factors mentioned in the text?

    <p>Investment knowledge</p> Signup and view all the answers

    What is the best strategy for long-term investing, according to the text?

    <p>Investing in assets with negative correlation</p> Signup and view all the answers

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