Investment Investment Vehicles and Instruments 2

Question 1

What is a preferred stock?

Accepted Answer

A class of stock that pays fixed dividends and has priority over common stock in liquidation

Answer

A stock that always increases in value

Answer

A stock purchased by company executives only

Answer

A government-guaranteed equity investment

Question 2

What is a call option?

Accepted Answer

The right to buy a stock at a specified price before expiration

Answer

The right to sell a stock at a specified price before expiration

Answer

A guaranteed purchase agreement for a commodity

Answer

A type of margin call from a broker

Question 3

What is a Treasury Inflation-Protected Security (TIPS)?

Accepted Answer

A bond whose principal adjusts with inflation to protect purchasing power

Answer

A stock guaranteed not to lose value

Answer

A savings account with a fixed rate above inflation

Answer

A government subsidy for investors

Question 4

Which investment vehicle allows you to invest in commodities like gold without physically owning the metal?

Accepted Answer

Commodity ETFs

Answer

Corporate bonds

Answer

Municipal bonds

Answer

Certificates of deposit

Question 5

What is a closed-end fund?

Accepted Answer

A fund that issues a fixed number of shares through an IPO and trades on an exchange

Answer

A mutual fund that stops accepting new investors after a set date

Answer

A fund restricted to retirement accounts only

Answer

A bond fund that matures on a specific date

Question 6

What does 'shorting a stock' mean?

Accepted Answer

Borrowing shares to sell them now, hoping to buy them back at a lower price later

Answer

Buying a stock and holding it for less than one year

Answer

Purchasing fractional shares of a company

Answer

Selling shares immediately after buying them at a higher price