Take the Investor Literacy Quiz

In general, investments that are riskier tend to provide higher returns over time than investments with less risk.

• 
  
  True
• 
  
  False

If you buy a company's stock…

• 
  You own a
  part of
  the company
  
  
• 
  You have
  lent money
  to the company
  
  
• 
  You are
  liable for
  the company's
  debts
• 
  The company will
  return your
  original investment to
  you with interest

If you buy a company's bond...

• 
  You own
  a part of
  the company
  
  
• 
  You have
  lent money
  to the company
  
  
• 
  You are
  liable for
  the company's
  debts
• 
  You can
  vote on
  shareholder
  resolutions

Over the last 20 Years in the U.S., the best average returns have been generated by:

• 
  Stocks
  
  
• 
  Bonds
  
  
• 
  CDs
  
  
• 
  Money market
  accounts
• 
  Precious metals
  
  

If a company files for bankruptcy, which of the following securities is most at risk of becoming virtually worthless?

• 
  The company's
  preferred stock
• 
  The company's
  common stock
• 
  The company's
  bonds

Which of the following best explains why many municipal bonds pay lower yields than other government bonds?

• 
  Municipal bonds
  are lower risk
  
  
• 
  There is a greater
  demand for
  municipal bonds
  
• 
  Municipal bonds
  can be tax-free
  
  

You invest $500 to buy $1,000 worth of stock on margin. The value of the stock drops by 50%. You sell it. Approximately how much of your original $500 investment are you left with in the end?

• 
  
  $500
• 
  
  $250
• 
  
  $0

Which is the best definition of "selling short"?

• 
  Selling shares
  of a stock shortly
  after buying it
• 
  Selling shares
  of a stock before it
  has reached its peak
• 
  Selling shares
  of a stock
  at a loss
• 
  Selling borrowed
  shares of a stock
  
  

What is the main advantage that index funds have when compared to actively managed funds?

• 
  Index funds are
  generally less
  risky in the
  short term
• 
  Index funds
  generally have
  lower fees and
  expenses
• 
  Index funds are
  generally less
  likely to decline
  in value
• 
  Don't know
  
  
  
  

Past performance of an investment is a good indicator of future results.

• 
  
  True
• 
  
  False
• 
  
  Don't know