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Financial Literacy Exam 4 Questions with Correct Answers
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  • Financial Literacy
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  • Financial Literacy

investing - Answer-involves a reasonable amount of risk speculative risk - Answer-begins when an investor aims for returns well above market averages; refers to assets that have wildly unpredictable outcomes stocks and bonds commodities options precious metals collectibles - Answer-types ...

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  • October 12, 2024
  • 13
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • financial literacy exam 4 questions with correct a
  • investing answer involves a reasonable amount of

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  • Financial Literacy
  • Financial Literacy

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Financial Literacy Exam 4 Questions
with Correct Answers
investing - Answer-involves a reasonable amount of risk

speculative risk - Answer-begins when an investor aims for returns well above market
averages; refers to assets that have wildly unpredictable outcomes

stocks and bonds
commodities
options
precious metals
collectibles - Answer-types of speculative risks

inflation risk
interest rate risk
business failure risk
market risk
global investment risk - Answer-five investment risk factors

inflation risk - Answer-cost of goods rise faster than your return

interest rate risk - Answer-assets with a fixed rate payment fall in value

business failure risk - Answer-stocks and bonds can lose value if the business is not
properly managed

market risk - Answer-market conditions can prevent growth and profits

global investment risk - Answer-when investing in foreign assets, currency conversion
can affect your overall return

conservative risk tolerance - Answer-investors would rather earn a small amount of
interest if it means keeping risks low and the initial investment intact

moderate risk tolerance - Answer-will accept some risk in order to achieve better returns

aggressive risk tolerance - Answer-investors are willing to take large risks in hopes of
earning large returns

asset allocation - Answer-an investment strategy that aims to balance risk and reward
by adjusting the percentage of each asset in a portfolio

principal - Answer-the money you invest

, investment income - Answer-interest payment and dividends collected while owning an
investment and any capital gains collected upon the sale of the investment asset

capital gain - Answer-the increase in value of an asset

capital loss - Answer-the decrease in value of an asset

stocks - Answer-indicates ownership in a company and represents a claim on a portion
of the assets; represented in shares

bonds - Answer-- a form of debt that you can purchase, where you act as the lender to a
corporation or government
- graded according to risk level
- the higher the risk of default, the higher the interest rate

paid semi-annually
fixed amount based on the stated rate of the bond at issuance - Answer-interest
payments on bonds

real estate - Answer-- can provide a steady stream of income
- more time-intensive for the investor
- incur expenses

annuities - Answer-a stream of payments paid to purchasers of an annuity

period certain annuity - Answer-paid for a term of years, which may or may not exceed
the lifetime of the investor

life annuity - Answer-paid as long as the investor lives

stocks
bonds
money market or cash equivalents
real estate or other tangible assets - Answer-four classes of assets

financial goals
amount of capital
time horizon
risk tolerance - Answer-key factors for asset allocation

securities - Answer-the investment vehicles where the investor either owns part of an
asset or company or is a creditor of a company or individual; examples are stocks and
bonds

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