Tips and Tools For Financial Success - Newton Free Library

Investing Quiz – Answers
1. Correct Answer: d. All of the above
Although people have differing risk levels, all of these investments are commonly bought.
2. Correct Answer: d. Common and Preferred
Common stock represents ownership in a corporation. Dividends paid on common stock fluctuate
with the profitability of the company. Preferred stock is an equity investment that typically pays a
fixed dividend on a regular schedule. Roth and 401K refer to retirement accounts. Standard and
Poor’s is a rating service.
3. Correct Answer: a. Buying stocks, bonds and certificates of deposits
Diversification specifically refers to having several different kinds of securities in an investment
portfolio.
4. Correct Answer: c. A junk bond
A junk bond is considered a risky investment and carries a lower rating.
5. Correct Answer: b. FDIC
The FDIC stands for the Federal Deposit Insurance Corporation and insures bank accounts. NYSE
is the New York Stock Exchange. AMEX is the American Stock Exchange and NASDAQ is the
National Association of Securities Dealers Automated Quotation system.
6. Correct Answer: d. All of the above
Letters a, b, and c are all true.
7. Correct Answer: c. Commission
Commission refers to a fee. Interest is money earned on a bank deposit or a bond or paid on a
loan or credit card. Dividends represent money paid on stock. Return on investment is the profit,
usually calculated as a percentage, made on an investment.
8. Correct Answer: c. Investment advisors
Investment advisors give advice. They do not necessarily buy and sell securities or create financial
plans.
9. Correct Answer: c. a capital gain
Dividends are paid on shares owned, not sold. A stock split changes the value of an individual
share of stock, but not your total investment.
10. Correct Answer: b. A term for the redemption value of a bond
Par value is the face value of a bond. It is equal to both the issue price and the amount repaid at
maturity.
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