Introduction to Investing

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Show your work for each problem.

1.
What is the main difference between saving and investing?
1. a)There is no difference
2. b)Investing has higher potential returns but more risk
3. c)Saving always makes more money
4. d)Investing is only for wealthy people
2.
What does diversification mean in investing?
1. a)Checking your investments daily
2. b)Only investing in bonds
3. c)Putting all money in one stock
4. d)Spreading money across many investments to reduce risk
3.
If you invest 100 dollars and earn 10% return, how many dollars do you earn?
4.
What is the total value after investing 500 dollars at 8% for one year? Round to the nearest whole number.
5.
Why is starting to invest early more important than investing a lot?
1. a)It's not - investing more is always better
2. b)Stocks are cheaper when you're young
3. c)Banks give better rates to young people
4. d)Compound growth gives more time for earnings to multiply
6.
You invest 1000 dollars at 5% annual return. What is the value after 2 years using compound growth? Round to the nearest whole number.
7.
You have 2000 dollars. You put 70% in stocks (10% return) and 30% in bonds (4% return). What is your total after one year?
8.
Which investment typically has higher returns but also higher risk?
1. a)Bonds
2. b)Savings accounts
3. c)All have the same risk
4. d)Stocks
9.
You invest 200 dollars per month for 12 months. How much did you invest in total, and what is it worth at the end if you earned 6% overall?
10.
You invest 5000 dollars at 8% annual return. What is the value after 3 years using compound growth? Round to the nearest whole number.
11.
Person A invests 3000 dollars at age 25. Person B invests 3000 dollars at age 35. Both earn 7% annually. How much more does Person A have at age 55?
12.
What does the Rule of 72 help you estimate?
1. a)The minimum amount to invest
2. b)How long it takes for your money to double
3. c)The best stocks to buy
4. d)Your tax rate on investments
13.
Using the Rule of 72, approximately how many years will it take for money to double at 6% annual return?
14.
Your company matches 100% of your retirement contributions up to 5% of salary. You earn 60000 dollars. If you contribute 5%, what is the total going into your retirement account per year?
15.
What is a portfolio in investing?
1. a)A bank fee
2. b)Your collection of all investments
3. c)A type of stock
4. d)A savings account