Investing Scavenger Hunt

Answer each of the following questions by using the information from pp. 35 and 36 in your textbook and the internet.  When finished, print and submit your results. 

 

INCOME INVESTMENTS

 

Savings Accounts

  1. Define a savings account and what it is designed to do.
  2. Is it a high risk or low risk investment?
  3. Explain what type of return one can expect to earn on a savings account.
  4. What are two benefits of a savings account?

 

U.S. Savings Bonds

  1. What is a savings bond?
  2. Is it a high risk or low risk investment?
  3. What type of return can one expect to earn on a savings bond?
  4. What are the two main types of savings bonds?

 

Certificates of Deposit (CD’s)

  1. Define a CD and what it is designed to do.
  2. What are the benefits of opening a CD?
  3. Explain why banks give you a higher interest rate when you deposit more money, and when you deposit money for a longer time.
  4. What is the risk /disadvantage of cashing a CD in early?

 

Money Market Deposit Accounts

  1. Define a money market account and what it is designed to do.
  2. Explain the benefits of opening a money market account.
  3. Explain the type of return one can expect to earn on a money market account.

 

Money Market Mutual Funds

  1. Define a mutual fund and what it is designed to do.
  2. Explain why mutual funds generally are a safer investment when compared to investing in just one stock.

 

Corporate and Government Bonds

  1. What is the difference between a Corporate and a Government bond?
  2. What is the name given to the potential return on a bond?
  3. What is the advantage of a Corporate Bond?  A Government Bond?
  4. Why is this a difficult investment for individual investors?

 

 


 

GROWTH INVESTMENTS

 

Stocks

  1. Define a stock and what it is designed to do.
  2. What are the advantages of investing in stocks? 
  3. What are the disadvantages of investing in stocks?
  4. What is the best way to purchase stocks (directly, online brokerage or mutual fund company or through a financial advisory).  Why?

 

Real Estate

  1. Why do people invest in Real Estate?
  2. What is the disadvantage of investing in Real Estate?

 

Collectibles

  1. What are collectibles?
  2. Why do people invest in collectibles?
  3. What is the risk with investing in collectibles?

 

Mutual Funds

  1. What is a Mutual Fund?
  2. What are three key benefits of Mutual Funds?
  3. What do investors like about owning Mutual Funds rather than individual stocks and bonds?

 

 


Financial Smarts Questions

  1. Susan adds $500 to her mutual fund every year for the next 10 years.  Joe decides to wait 10 years when he knows he will have a lump sum of $5,000 to invest in a mutual fund.  If both Susan and Joe earn on average a 7 percent rate of return, who will have the larger mutual fund balance in 20 years?
    1. Joe
    2. Susan
    3. They will have the same balance amount because they each invested the same amount at the same rate.
    4. There is not enough information presented to make a prediction.

 

  1. In the future, a dollar will be worth 
    1. The same as a dollar today
    2. More than a dollar today
    3. Less than a dollar today

 

  1. If an investor can earn 9 percent on an investment, approximately how long will it take to double in value?
    1. 12 years
    2. 9 years
    3. 8 years
    4. 72 months

 

  1. What approximate interest rate would an investor need to earn in order to double the value of an investment in six years? 
    1. 72%
    2. 6%
    3. 10%
    4. 12%

 

  1. The time value of money can best be explained using which one of the following concepts?
    1. The Rule of 72
    2. The dynamics of compounding
    3. The risk-to-return relationship
    4. The “pay yourself first” philosophy

 

  1. Which statement below is true about mutual funds?
    1. You can choose which stock to include in your mutual funds
    2. Mutual funds are convenient and professionally managed
    3. Mutual funds offer guaranteed returns
    4. All mutual funds buy stocks

  

  1. Which one of the following types of investments has the highest risk and the highest potential rate of return? 
    1. Savings bonds
    2. Government bonds
    3. Stocks
    4. Money market mutual fund

 

  1. Which one of the following types of investments has the lowest risk and lowest rate of return?
    1. Real estate
    2. Collectibles
    3. Stocks
    4. Savings bonds

 

  1. The basic rule of a risk-to-return relationship is that the  
    1. Higher the risk, the lower the return rate.
    2. Higher the risk, the higher the return rate.
    3. Lower the risk, the higher the return rate.
    4. Two are not related.

 

  1. The Rule of 72 is useful in calculating the  
    1. Fluctuations of the stock market.
    2. Time required to double an investment.
    3. Age of money.
    4. Interest

 



 Financial Smarts Questions

  1. Define the following terms:  Time Value of Money, Stock, Savings Account, Rule of 72, Rate of Return, Investments, Interest, Diversification, Compounding
  2. What is the difference between saving and investing?
  3. Explain why investment experts recommend diversifying investments.
  4. Which investment offers the greatest reward? 
  • (a) U.S. Savings Bonds
  • (b) Certificate of Deposit
  • (c) Money Market Account
  • (d) Preferred Stock

  1. Which investment offers the greatest risk? 
    • (a) Commodities
    • (b) Insured Savings Account
    • (c) Certificate of Deposit
    • (d) Insured Savings Account.

 

 

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