Test: Basics of Investing

What is equity:

When you own a share in a company, you are entitled to a share of:

When you buy a bond issued by a company, you:

What is the net worth of an individual or company?

How is the profit or net income of a business calculated?

When a company makes a profit, it keeps part of it to invest in the business and distributes the rest to its shareholders. The latter part is called:

You bought a stock 10 years ago for £150. You’ve received a £15 dividend check every year, and are now selling the stock for £225. How much is your capital gain?

What are securities?

What are mutual funds?

Loans are often backed by assets such as land or machinery pledged as collateral. If the borrower defaults, the lender can seize the assets. Such loans are called:

What is the role a loan guarantor:

What is a bank account called that pays no interest and can be accessed any time:

What is the portion of household income that is not used for consumption called?

What are assets in personal finance:

What is a liquid asset?

Janet is 28 years old. This is her balance sheet:

Cash: £5,000
Equities: £25,000
Bonds: £10,000
Flat: £150,000
Student loan: £15,000
Mortgage: £100,000

What is Janet’s net worth:

You own a share of stock listed on the stock exchange. Does it count as cash:

You keep cash in a bank account. If the bank goes bankrupt, you:

You keep cash hidden in your home. What could cause a loss?

Note: There can be several correct answers to this question

If you have money in a Certificate of Deposit, can you withdraw it at any time?

What is a reasonable amount to be kept in cash (or cash equivalent, like checking accounts):

Which of the following bank accounts do you choose:

Which of the following features are important when choosing a bank account:

Note: There can be several correct answers to this question

You just received a large sum—say, £170,000 in the UK or $500,000 in the US—and want to deposit it in the bank; which do you choose:

If a borrower cannot meet principal or interest payments due to the lender, this is called:

You open a savings account paying 3% interest per year. Which is better:

If you buy a corporate bond with a floating interest rate, it means that the interest rate changes in line with:

What is an investment-grade bond:

What are junk bonds:

Which types of bonds should make up the bulk of your fixed-income portfolio?

Bonds tend to be safe and offer steady income. What is a key drawback of bonds as an investment category:

What is the impact of lower interest rates on bond prices?

Which of the following instruments carries a higher interest rate?

If a savings account pays 2% interest, which of the following interest rates may apply to a mortgage loan?

Which of the following benefits accrue to shareholders:

Note: There can be several correct answers to this question

What are capital gains?

What determines the price of a share:

In the long run, the value of a share depends on:

What is the difference between an active and a passive mutual fund:

What are Exchange Traded Funds (ETF)?

Is it better to buy shares of 5 different companies or 1 mutual fund?

Diversification means buying different types of assets. This results in:

Your brother-in-law tells you that the company he works for is planning a secret takeover bid for British Motors. What do you do?

Why is it important to learn about the real estate market?

What is a mortgage:

What is the main advantage of mortgages compared with rent payments:

What is a prudent limit for mortgage debt:

Which is more risky:

What is an advantage of gold as an investment?

Over the past 150 years, the prices of industrial commodities (iron ore, copper, rubber, etc.) have:

Which of the following investment categories has generated the highest returns over the past century?

What is the most important principle of personal finance?

How much cash should you hold?

When is the best time to start planning for retirement?

Which of the following is an essential principle of investing?

Which investments normally earn a higher return:

What does “investing in yourself” mean:

Which type of asset has more volatiles prices:

When a company goes bankrupt, which of the following groups is paid off last?

According to legendary investor Warren Buffett, what is the optimal time period to own a stock?

Which of the following investment classes has generated higher returns since 1900?

Is inflation of 10% a year good for the economy?

Which of the following events boosts gold prices?

What could be an appropriate share of equities in total financial assets of a 25-year old?

Which of the following increases your net worth:

According to life-cycle investing, how should you adjust your portfolio as you get nearer retirement age?

Dollar or pound-cost averaging means investing a fixed sum into a certain asset at regular intervals. What is the advantage of this:

Assuming that you aim for a 60% share of equities in your porfolio, what do you do if after a long rise in the stock market, equities account for 75%?

Which of the following groups should hold relatively less equities and more fixed-income in their portfolio:

Note: There can be several correct answers to this question

My uncle says the best way to make money in the stock market is to buy low and sell high. Should I follow his advice?

You’re planning a trip around the world. You estimate that you need about £10,000; you have £8,000 saved up and believe you can save £2,000 over the next 12 months. What should you do with the £8,000?

Which of the following equity investments is relatively riskier and should therefore earn a higher return:

Which of the following stock markets is relatively riskier and should therefore earn a higher return:

Which of the following investments is relatively riskier and should therefore earn a higher return:

If I’m convinced a stock will go up, I could try and borrow money to buy it, for example from a broker. Is this a good strategy?

Which of the following are advantages of a “buy-and-hold” strategy for stocks?

Note: There can be several correct answers to this question