NAB Investment Basics

Question 1

What is the difference between stocks and bonds?

Accepted Answer

Stocks represent ownership in a company; bonds are loans to a company or government

Answer

Stocks are safer than bonds

Answer

Bonds give you ownership rights

Answer

There is no difference

Question 2

What is diversification in investing?

Accepted Answer

Spreading investments across different asset types to reduce risk

Answer

Investing all money in one stock

Answer

Only investing in bonds

Answer

Keeping all money in a savings account

Question 3

What is a mutual fund?

Accepted Answer

A pooled investment vehicle where many investors' money is combined and managed by a professional

Answer

A personal savings account

Answer

A government bond

Answer

A type of insurance

Question 4

What does ROI stand for and what does it measure?

Accepted Answer

Return on Investment — the gain or loss relative to the amount invested

Answer

Rate of Interest

Answer

Revenue of Income

Answer

Risk of Investment

Question 5

What is a 401(k) retirement plan?

Accepted Answer

An employer-sponsored retirement savings plan with tax advantages

Answer

A type of savings account for children

Answer

A government pension program

Answer

A short-term investment vehicle

Question 6

What is inflation and how does it affect investments?

Accepted Answer

A general increase in prices that reduces purchasing power over time

Answer

A decrease in prices

Answer

A type of tax

Answer

Only affects international markets