Investing & Markets: Checkpoint 1

Covers risk and return, stocks, and bonds.

Five questions on the fundamentals of risk, stocks, and bonds.

Question 1 of 5 The core rule connecting risk and return in investing is:

Lower risk always means higher return Higher expected return is compensation for taking on higher risk Risk and return are unrelated Return is guaranteed if you wait long enough

Question 2 of 5 Owning a share of stock means you:

Have lent money to the company Own a small piece of legal ownership in the company Are guaranteed a fixed annual payment Work for the company

Question 3 of 5 A 'dividend' is:

A guaranteed increase in stock price A portion of company profit paid directly to shareholders A type of bond A government tax on stock sales

Question 4 of 5 Compared to a shareholder, a bondholder generally has:

No legal claim on the issuer at all A legally prioritized claim to be repaid ahead of shareholders Voting rights in the company A claim only after all shareholders are paid

Question 5 of 5 Diversification works because combined investments:

Always move in exactly the same direction Have risks that can partly cancel out when they don't move together Are guaranteed to be profitable Eliminate all risk completely

← Back to Bonds 101: Lending Your Money for Interest Next lesson → What Is an Index Fund?

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