investing test

Question 1

risk tolerance

Answer 1

A measure of how much risk (potential loss) an investor is willing to take within his/her investment portfolio

Question 2

risk tolerance includes the assessment of market risk, including:

Answer 2

volatility
Industry and sector news
Economic and political events
Regulatory and interest rate changes

Question 3

other factors that can influence and investors risk tolerance, include the investors:

Answer 3

age
income
comfort level
short-term investment goals
long-term investment goals
personality
lifestyle
time horizon

Question 4

aggressive investor

Answer 4

has a higher risk tolerance, and is willing to risk more of his/her money for the possibility of better returns

Question 5

conservative investor

Answer 5

has a lower risk tolerance

Question 6

An investor who sits in the middle between an aggressive and a conservative investor has

Answer 6

Moderate risk tolerance

Question 7

diversification

Answer 7

investors can reduce risk by diversifying their investment portfolios/spreading investment dollars among different:
securities (stocks, mutual funds, bonds, etc.)
industries
sectors

risk management strategy

Question 8

risk

Answer 8

the possibility of loss or the chance of losing all or part of the value of an investment

Question 9

time horizon

Answer 9

The amount of time before invested funds need to be liquidated

Question 10

risk management

Answer 10

having strategies that help mitigate risks associated with your investments

Question 11

sector

Answer 11

A broad group of stocks, often in the same industry

Question 12

industry

Answer 12

A more specific group of companies producing similar products or services

Question 13

index

Answer 13

Reports changes in a specific sector, or in the economy

Question 14

beta

Answer 14

Measures volatility, (rapid or unexpected changes.)

Question 15

Market capitalization

Answer 15

The total dollar value of a companies outstanding shares of a stock

Question 16

Mutual fund

Answer 16

an investment that pulls money from investors and invests in a diversified, portfolio of stocks, bonds, and other securities

Question 17

investing

Answer 17

when you buy something with the expectation that it will earn you money over time

Question 18

long-term goal

Answer 18

something you want to do in the future (several years away)

Question 19

short-term goal

Answer 19

something you want to do in the near future (today, this week, this month, this year)

Question 20

saving

Answer 20

money not spent (allowance, birthday present, part-time job, or other source in a piggy bank or bank account)

Question 21

company

Answer 21

a business formed to manufacture or supply products or services for profit

Question 22

product

Answer 22

an item sold by a company

Question 23

brand

Answer 23

the name a company gives a product it makes a or service it provides

Question 24

public company

Answer 24

a company whose shares can be purchased

Question 25

private company

Answer 25

a company that is privately owned by a group of people; shares of the company cannot be purchased

Question 26

stock

Answer 26

a share of ownership of a publicly traded company

Question 27

common stock

Answer 27

corporate ownership and owners can vote in matters of the company; most large companies pay dividend on common stock and the stock may appreciate in value if the company does well

Question 28

preferred stock

Answer 28

owners do not have voting rights but receive dividends before any returns paid to common stock owners

Question 29

IPO (initial public trade offering)

Answer 29

a public offering in which shares of a company are sold to investors

Question 30

stockholder/shareholder

Answer 30

the owner of a stock

Question 31

stock exchange

Answer 31

a market in which securities are bought and sold

Question 32

investment strategy

Answer 32

an individualist approach to investment risk

Question 33

highest to lowest investment risks and rewards

Answer 33

commodities collectibles real estate stocks mutual funds corporate bonds government bonds certificates of deposit savings accounts cash and checking accounts

Question 34

why do companies issue stock?

Answer 34

they have an initial public offering to get cash by letting people own their company; they can grow