Investing

Score: / 10

Circle the best answer for each question. Each question is worth 1 point.

You'll need $3,000 for a study-abroad trip next summer.
1. Where does that money most sensibly go?
- A. A savings account
- B. A stock index fund
- C. A single hot stock
- D. A crypto coin a friend recommended
2. What's the difference between a stock and a bond?
- A. They're the same thing.
- B. A stock is a loan; a bond is ownership.
- C. Bonds are always riskier.
- D. A stock is ownership in a company; a bond is a loan that pays interest.
Two funds track the same index. Fund A charges 0.04% a year; Fund B charges 0.9%.
3. Over decades, what's the likely difference?
- A. No difference — they hold the same stocks.
- B. Fund B will beat Fund A because it costs more.
- C. Fund A will likely leave you with noticeably more money.
- D. Fund B is safer.
Your money is split evenly across 50 companies, and one goes bankrupt.
4. About how much of your portfolio did that cost you?
- A. About 2%
- B. About 50%
- C. All of it
- D. About 20%
5. Diversification protects you from losses during a broad market crash.
True/False
Interest rates rise after you buy a 10-year bond.
6. What happens to its price if you sell before it matures?
- A. It rises.
- B. It usually falls.
- C. It stays exactly the same.
- D. The government buys it back at a premium.
Two investors hold the same fund when it drops 30%. One needs the money in 3 months; the other in 30 years.
7. Why is the drop more harmful to the first investor?
- A. They may have to sell at the low point, locking in the loss.
- B. Their fund charges more fees.
- C. Drops only affect younger investors.
- D. It isn't — both are harmed equally.
8. What is dollar-cost averaging?
- A. Waiting for the perfect time to invest a lump sum
- B. Investing a fixed amount on a regular schedule
- C. Averaging the price of all stocks you own
- D. Converting dollars to another currency
An account on social media promises "guaranteed 25% returns every month" and says spots close tonight.
9. What's the best response?
- A. Invest a small amount to test it
- B. Ask for more screenshots of profits
- C. Treat it as a likely scam: don't send money, and report it
- D. Borrow money so you don't miss out
10. A target-date fund gradually shifts from stocks toward bonds as its target year approaches.
True/False

Answer key

Investing · Short version

1. A. A savings account (Final review)Money needed within a year shouldn't be exposed to market drops.
2. D. A stock is ownership in a company; a bond is a loan that pays interest. (Final review)Stockholders own part of the company. Bondholders are lenders.
3. C. Fund A will likely leave you with noticeably more money. (Final review)Same holdings, but Fund B's higher fee compounds against you every year.
4. A. About 2% (Final review)Each company is 1/50 of your money — 2%. That's diversification at work.
5. False (Final review)It reduces single-company risk, but market-wide drops affect nearly everything.
6. B. It usually falls. (Final review)New bonds now pay more, so buyers pay less for older, lower-paying bonds.
7. A. They may have to sell at the low point, locking in the loss. (Final review)A long time horizon means time to recover. A short one may force a sale at a loss.
8. B. Investing a fixed amount on a regular schedule (Final review)It builds the habit and removes the need to time the market.
9. C. Treat it as a likely scam: don't send money, and report it (Final review)Guaranteed high returns plus urgency are classic scam signals.
10. True (Final review)That's how target-date funds lower risk as the money's due date gets closer.