ECON – WISE QUESTIONS AND ANSWERS
The only way to make money in the stock market is to buy stocks at a low price and sell
them at a higher price - Answers - False
David bought stock for $4,000 and one year later he sold it for $1,000. The sale resulted
in a: - Answers - Capital loss
Maxwell, who is 25, asks a bunch of his friends for investing advice. Check the best two
recommendations - Answers - Start investing ASAP, and invest mainly in stocks while
you're young AND Avoid investing in a single company's stock; you need to diversify
your portfolio.
A brokerage firm's main duty is to be a middleman that connects buyers and sellers to
facilitate a transaction - Answers - True
Ben's annual income is $30,000, and he contributed $3,000 to a traditional IRA in his
local bank. What is his taxable income? - Answers - $27,000
The activity of the New York Stock Exchange most closely resembles: - Answers - An
auction house
Buying a treasury bill (T-bill) is best for investors who are looking for - Answers - a
secure, low risk investment
Joshua and Alicia just had a baby. They received money as baby gifts and want to put it
away for the baby's college tuition. Which of the following has the lowest potential
growth rate over the next 18 years? - Answers - Savings accounts
Which financial product typically pays the highest rate of interest? - Answers - certificate
of deposit
This is a type of retirement account offered by your employer that sometimes will match
your contribution to the account (free money) - Answers - 401 K
This is a type of retirement account that is tax-deferred with only your contribution to the
account - Answers - Traditional IRA
Elaine has been saving over the years and now at the age of 23 has $1,000 to invest.
She knows herself well and has a high tolerance for risk. She would like this $1,000 to
be the start of her retirement fund. What do you think is a good investment strategy for
Elaine? - Answers - Invest $800 in a stock index fund and $200 in a bond index fund
Which of the following investment choices best reflects a diversified portfolio? - Answers
- Investing in an S&P500 index fund
, When an investment company raises money from investors and invests the money in
stocks, bonds, or other securities, the investment instrument is called a: - Answers -
Mutual fund
It is possible for stockholders to lose money in addition to the amount they invested, if a
company fails. - Answers - False (you only lose what you contribute)
Investing in a diversified portfolio of stocks guarantees that you won't lose money with
your investments. - Answers - False
Summer owns Disney shares and cannot attend the annual stockholder meeting. She
can: - Answers - Vote by mail or online through a proxy
Which of the following is your right as a shareholder of common stock? - Answers - The
right to receive dividends if paid
An investment that represents ownership in a company or corporation is called a stock -
Answers - True
If a business wants to raise capital but not create debt, it can: - Answers - Float a bond
issue
When is there high risk for a stock to become worthless? - Answers - The business that
issued the stock is about to declare bankruptcy
What is a Mutual Fund? - Answers - A pool of securities you can buy as an investment
Which is a characteristic of open-ended mutual funds? - Answers - Investors typically
hold fractions of shares
An important consideration when saving money for emergencies is - Answers - high
degree of safety and liquidity
LaMariana sold her stock in ABC company for a higher price per share than she bought
it for. She realized a: - Answers - Capital gain
Using a brokerage firm, a qualified investor buys 1000 shares of a common stock at $50
a share on 50% margin. This means that the - Answers - brokerage firm is lending the
investor 50% of the money.
Which of the following would represent the best investment strategy for a novice
investor in her early 20s? - Answers - Invest 75% in a stock index fund and 25% in a
mix of bonds, and repeat this strategy every month
People who invest in the stock market will automatically make money - Answers - False
The only way to make money in the stock market is to buy stocks at a low price and sell
them at a higher price - Answers - False
David bought stock for $4,000 and one year later he sold it for $1,000. The sale resulted
in a: - Answers - Capital loss
Maxwell, who is 25, asks a bunch of his friends for investing advice. Check the best two
recommendations - Answers - Start investing ASAP, and invest mainly in stocks while
you're young AND Avoid investing in a single company's stock; you need to diversify
your portfolio.
A brokerage firm's main duty is to be a middleman that connects buyers and sellers to
facilitate a transaction - Answers - True
Ben's annual income is $30,000, and he contributed $3,000 to a traditional IRA in his
local bank. What is his taxable income? - Answers - $27,000
The activity of the New York Stock Exchange most closely resembles: - Answers - An
auction house
Buying a treasury bill (T-bill) is best for investors who are looking for - Answers - a
secure, low risk investment
Joshua and Alicia just had a baby. They received money as baby gifts and want to put it
away for the baby's college tuition. Which of the following has the lowest potential
growth rate over the next 18 years? - Answers - Savings accounts
Which financial product typically pays the highest rate of interest? - Answers - certificate
of deposit
This is a type of retirement account offered by your employer that sometimes will match
your contribution to the account (free money) - Answers - 401 K
This is a type of retirement account that is tax-deferred with only your contribution to the
account - Answers - Traditional IRA
Elaine has been saving over the years and now at the age of 23 has $1,000 to invest.
She knows herself well and has a high tolerance for risk. She would like this $1,000 to
be the start of her retirement fund. What do you think is a good investment strategy for
Elaine? - Answers - Invest $800 in a stock index fund and $200 in a bond index fund
Which of the following investment choices best reflects a diversified portfolio? - Answers
- Investing in an S&P500 index fund
, When an investment company raises money from investors and invests the money in
stocks, bonds, or other securities, the investment instrument is called a: - Answers -
Mutual fund
It is possible for stockholders to lose money in addition to the amount they invested, if a
company fails. - Answers - False (you only lose what you contribute)
Investing in a diversified portfolio of stocks guarantees that you won't lose money with
your investments. - Answers - False
Summer owns Disney shares and cannot attend the annual stockholder meeting. She
can: - Answers - Vote by mail or online through a proxy
Which of the following is your right as a shareholder of common stock? - Answers - The
right to receive dividends if paid
An investment that represents ownership in a company or corporation is called a stock -
Answers - True
If a business wants to raise capital but not create debt, it can: - Answers - Float a bond
issue
When is there high risk for a stock to become worthless? - Answers - The business that
issued the stock is about to declare bankruptcy
What is a Mutual Fund? - Answers - A pool of securities you can buy as an investment
Which is a characteristic of open-ended mutual funds? - Answers - Investors typically
hold fractions of shares
An important consideration when saving money for emergencies is - Answers - high
degree of safety and liquidity
LaMariana sold her stock in ABC company for a higher price per share than she bought
it for. She realized a: - Answers - Capital gain
Using a brokerage firm, a qualified investor buys 1000 shares of a common stock at $50
a share on 50% margin. This means that the - Answers - brokerage firm is lending the
investor 50% of the money.
Which of the following would represent the best investment strategy for a novice
investor in her early 20s? - Answers - Invest 75% in a stock index fund and 25% in a
mix of bonds, and repeat this strategy every month
People who invest in the stock market will automatically make money - Answers - False
