Here you can find answers to all modules of EverFi Marketplaces – Investing Basics.
Contents
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economy
the wealth and resources of a country or region, especially in terms of the production and consumption of goods and services.
Market
any arrangement that allows buyers and sellers to exchange things
financial markets
markets where financial securities, such as stocks and bonds, are bought and sold
stock broker
individual or organization that receives and executes buy and sell orders on behalf of outside customers in return for commissions
market makers
securities dealers who “make markets” by offering to buy or sell certain securities at stated prices
GDP
Gross Domestic Product- the total market value of all final goods and services produced annually in an economy
unemployment rate
the percentage of the labor force that is unemployed
Hyperinflation
A very rapid rise in the price level; an extremely high rate of inflation.
Inflation
a general increase in prices and fall in the purchasing value of money.
fiscal policy
Government policy that attempts to manage the economy by controlling taxing and spending.
monetary policy
Government policy that attempts to manage the economy by controlling the money supply and thus interest rates.
Recession
A short-term slowdown in a nation’s economy
Depression
A long-term period of low economic activity and rising unemployment
Entrepreneur
a person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so.
Capital
wealth in the form of money or anything else of value
Bootstrapping
using low-cost or free techniques to minimize your cost of doing business; using your own money to start up
Angel Investors
individuals who invest their own money in start-up companies with high growth potential in exchange for a share of ownership
startup
a new and temporary venture that is trying to discover a profitable business model for future success
venture capitalists
Individuals or companies that “pool” their money to invest in new businesses in exchange for partial ownership of those businesses.
IPO
Initial public offering, a corporation’s first offer to sell shares to the public
SEC
Securities and Exchange Commission – regulates securities markets
Securities
All of the investments, including stocks, bonds, mutual funds, options, and commodities, that are traded.
Ticker Symbol
The abbreviated term that is used to identify a stock for trading purposes (F, AAPL, GME, NKE)
financial advisor
A licensed professional who provides financial planning and advice on financial matters.
Everfi Marketplaces Investing Basics Module 1 Answers
What is the global economy?
All the transactions that occur in connected markets across the economies of different countries.
All of the transactions that occur in connected markets across the economies of different countries create…
The global economy
How does a global economy impact you?
Both A and B (you can access G&S, & investments from markets around the world; which means you are connected to different markets around the world)
How does the financial market impact the economy?
Both A and C (the financial market helps the economy grow; which gives individuals, companies, and government access to money they need)
Which of the following statements about the importance of the financial market is TRUE?
The financial market is one of the most important markets for economic growth.
Which of the following statements about the relationship between the financial market and the economy is TRUE?
The financial market helps the economy grow.
Which of the following statements about the impact of the financial market is TRUE?
All of the above
Why might individuals want to participate in the financial market?
Individuals can invest their money in the financial market to help them achieve their financial goals.
Imagine you own a startup company. How might you benefit from participating in the financial market?
Both A and B are true.
Which of the following is NOT an example of a financial market?
The export market
Which financial market is the stock market a part of?
The capital market
The capital market is the market for…
Stocks and bonds
Which of the following is NOT an example of a transaction?
Giving your friend a gift for their birthday.
Which of the following is NOT an example of a transaction?
An individual volunteering their time at a local charity.
Which of the following is NOT an example of a transaction?
Finding a $10 bill on the ground.
The financial market first started over 500 years ago with merchants trading debts.
True
The financial markets are a relatively new technological development created in the last 50 years.
False
The financial markets were created more than 500 years ago.
True
What is a stock exchange?
A place where investors can buy and sell different investments.
What is the place where investments are bought and sold called?
The stock exchange
Which of the following statements is TRUE?
A stock exchange is a place where investors can buy and sell different investments.
Most stock exchanges today use electronic trading.
True
Most stock exchanges today use floor trading with human brokers.
False
The stock exchange scene has not changed much over time; floor trading and human brokers are still used at most stock exchanges.
False
What does a broker do?
Makes investment trades for their clients
Which person is responsible for buying and selling investments for their clients?
A broker
Why might a broker look at world news and financial data?
To help them make recommendations to their clients on what investments to buy and sell.
When there are events that promote economic growth in the news, what usually happens to stock prices?
Stock prices in all industries go up
When a natural disaster happens, what usually happens to stock prices?
Stock prices go up in some industries and down in other industries
When there are events that are unfavorable to economic growth (such as a global recession) in the news, what usually happens to stock prices?
Stock prices in all industries go down
Everfi Marketplaces Investing Basics Module 2 The Economy Answers
| Question | Answer |
|---|---|
| Which of these situations are more likely to happen in a GOOD economy? | Carlos was able to finish his degree & interview at many companies until he finds a job he likes best. He’s smart – he will choose the job he enjoys the MOST with the best benefits & salary. |
| Which of these situations are more likely to happen in a GOOD economy? | Alex just graduated from technical school & took a new job that pays her a high salary with fantastic benefits. |
| Which of these situations are more likely to happen in a BAD economy? | Mcdonald’s has to layoff 12 employees because business is very slow. |
| What is GDP (gross domestic product)? | The total value of all the finished goods & services produced in a country over a certain period of time. |
| An increasing unemployment rate is associated with a growing economy | False |
| What phase in the business cycle is a period when the level of business activity rises & GDP grows? | Expansion |
| What phase in the business cycle is a period when the level of business activity declines & GDP falls? | Contraction |
| What phase in the business cycle is a period that marks the end of declining business activity? | Trough |
| Why might the government & Central Bank use policy to manage the economy? | To avoid a depression in the economy |
| Which of the following statements about economic policy is FALSE? | Economic policy is used to ensure all businesses are following regulations |
| If the government & central bank don’t use economic policy, what could happen? | All of the answers are correct |
| Which of the following statements about monetary policy is TRUE? | Monetary policy adjusts the amount of money & credit available in the economy |
| Which of the following statements about Monetary Policy is FALSE? | Monetary policy adjusts the tax policies in the economy |
| What is Monetary Policy? | Monetary policy is set by the Central Bank to influence the amount of money & credit available in the economy |
| What is expansionary policy used for? | To stimulate growth in the economy |
| What is contractionary policy used for? | To fight rapid inflation in the economy |
| In order to implement expansionary policy, the government and Central Bank must _ government spending, _____taxes & _____interest rates. | increase, decrease, decrease |
| In order to implement contractionary policy, the government & Central Bank must _____government spending, _____taxes & _____interest rates | decrease, increase, increase |
| The state of the economy alone can predict how the financial market will perform | False |
| Which of the following behavior(s) are more likely to happen in a GOOD economy? | Snap Fitness takes out a loan to buy new equipment |
Everfi Marketplaces Investing Basics Module 3 Startup to IPO Answers
A(n) _________ is a person who starts a new business and assumes all the risks and rewards of running the business.
Entrepreneur
Which of the following statements about entrepreneurs is FALSE?
Entrepreneurs aren’t exposed to any risk when starting a new business.
Which of the following statements about entrepreneurs is TRUE
Entrepreneurs are willing to take risk.
What are some common traits good entrepreneurs have?
They take calculated risks.&They try to solve problems by using new products and processes.
If an entrepreneur says they are using “bootstrap financing,” what are they referring to?
They used their own money to start their business.
What method of financing do entrepreneurs often use when they are first developing their business idea?
Bootstrapping
Imagine you are an entrepreneur starting a new video game company. What kind of financing would you most likely use to test out your new business idea?
Bootstrapping
What is the difference between debt financing and equity financing?
Equity financing involves selling shares of ownership in the company while debt financing does not.
Which of the following statements about debt financing is FALSE?
When a bank gives a company a loan, they become partial owners of the company.
Which of the following statements about equity financing is FALSE?
Companies often have to pay interest when they use equity financing.
Imagine you’ve used your own money to develop your business idea. Now you need more funding to keep growing. Which financing method would be available to you at this stage?
Angel investing
Imagine you own a successful startup company that’s been doing well for several years. You think you can grow your company if you had more industry connections. What method of financing would be best for your company at this stage?
Venture capital
Imagine you own an established startup with growing profits. You are looking for funding to greatly expand company operations. What method of financing would be best for you?
Going public
In finance, the acronym IPO stands for:
Initial. Public. Offering.
When a private company wants to offer stock on the stock market, they go through the _______ process.
Initial Public Offering
When a company “goes public,” only a small amount of investors are allowed to invest in the company.
False
When a company “goes public,” investors anywhere can buy shares of ownership in the company.
True
Which of the following are disadvantages of going public?
Giving up some ownership& Need to meet expensive legal requirements Losing some control over company decisions
Which of the following is an advantage of going public?
Ability to attract many investors
Which of the following steps is NOT involved in going public?
Finding private investors to invest
When a company is attempting to go public, they will hire an investment bank to…
Figure out how much money to raise & Create a prospectus
Which of the following statements about the IPO process is FALSE?
Companies must seek out private investors for the company.
Companies already on the stock market get to choose the price of their stocks.
False
When companies go public they get a direct say in choosing the price of their stocks.
True
The price of company stocks already trading on the stock market are determined by supply and demand.
True
Everfi Marketplaces Investing Basics Module 4 Keys to Investing Answers
When would it be a good idea to put your money in a savings account instead of investing it?
When you’re looking to maintain the value of your money with a little bit of growth.
When would it be a good idea to invest your money instead of putting it in a savings account?
When you won’t need the money for a long time.
Which of the following statements about investing is FALSE?
Investing is best when you’re looking to maintain the value of your money with a little bit of growth.
Why might an investor want to invest in the stock market?
Investing in companies through the stock market offers a chance to share in their profits.& Investing in the stock market usually offers a higher return than interest earned on a savings account.
People invest in the stock market because:
The time value of money states that money available now is worth more than the same amount of money later because of its potential to grow. & Investing in companies through the stock market offers a chance to share in the profits of those companies. &Investing in the stock market generally offers a higher return than interest earned on a savings account.
Which of the following is NOT a reason why people invest in the stock market?
Investing is a guaranteed way to make money.
Historically, long-term returns of the stock market have been negative.
False
In the past 90 years, the stock market has had positive returns, averaging 10% annually.
True
A ______ is a fixed income investment that represents a loan from an investor to a borrower.
Bond
A _____ is a short-term investment that is considered highly liquid.
Cash Equivalent
A _____ is a share of ownership in a company.
Stock
Which of the following statements about stocks is FALSE?
Stocks pay out interest annually.
Which of the following statements about bonds is TRUE?
When a bond matures, you get the full amount you loaned back with interest.
Which of the following statements about cash equivalents is FALSE?
Cash equivalents are considered relatively risky compared to stocks.
Which of the following is NOT a consideration when determining your asset allocation?
Portfolio diversification
How comfortable you feel taking the risk of losing your money refers to:
Risk tolerance
How long you plan to keep your investments in your portfolio refers to:
Time horizon
Miguel is 25 years old, has low financial health, a long time horizon and a high risk tolerance. Which asset allocation would you recommend?
85% stocks and 15% bonds/cash equivalents.
Yena is 38 years old, has average financial health, an intermediate time horizon, and an average risk tolerance. Which asset allocation would you recommend?
65% stocks and 35% bonds/cash equivalents.
Jason is 58 years old, has strong financial health, a short time horizon, and an average risk tolerance. Which asset allocation you recommend?
45% stocks and 55% bonds/cash equivalents.
What is diversification?
An investment strategy that mixes a wide variety of investments from different categories within a portfolio.
___________ is an investment strategy that mixes a wide variety of investments from different categories within a portfolio.
Diversification
A well diversified portfolio needs about 3 to 5 stocks from different categories.
False
You can diversify your portfolio by investing all your money in one industry.
False
A well-diversified portfolio needs about 20-25 stocks from different categories.
True
How is a mutual fund different than an index fund?
Mutual funds are actively managed while index funds are passively managed.
How is an index fund different than an exchange-traded fund?
Exchange-traded funds trade directly on stock exchanges while index funds do not.
Everfi Marketplaces Investing Basics Module 5 Investment Game Answers
What is a brokerage account?
An account used to buy investments like stocks, bonds, and mutual funds
What is an equity fund?
A mutual fund that is primarily invested in stocks
Equity funds, index funds, and market cap equity funds are best for which type of investor?
Investors with a long time horizon
If you’re carrying debt that charges a high interest rate, you should prioritize paying off the debt instead of maximizing your investment contributions.
True
Which of the following is NOT an example of investing in yourself?
NOT reading a book or Signing up for an online class
Ann is an investor with a short time horizon and low risk tolerance. Which mutual funds would be best for her portfolio?
All of the above A) Fixed income funds B) Money market funds and C) Balanced funds with a high bond allocation
Why is it important to adjust the asset allocation of your investment portfolio as you get closer to retirement?
To protect your investment earnings in case the stock market goes down
If you were looking to invest in a mutual fund with strong growth, what type of mutual fund would you invest in?
An equity fund
If the stock market goes down during a recession, you should sell all of your investments to minimize your losses.
true
Investors with a ______ risk tolerance may have a an intermediate time horizon and are usually looking for a mix of safety and growth in their investment portfolio.
Medium
A _________ account is an account you use to buy investments like stocks, bonds, and mutual funds.
Brokerage
Which type of mutual fund has the highest allocation toward stocks?
Equity fund
Fixed income and money market funds are best suited for which type of investor?
Investors with a short time horizon
Investors with a ______ risk tolerance may have a short time horizon and are usually looking to maintain the value of their investments with minimal growth.
Low
If the stock market goes down during a recession, you should focus on the long-term horizon and ensure your portfolio is well-diversified to minimize losses.
True
Which of the following is an example of investing in yourself?
NOT Taking the time to plan your financial budget NOT Investing your money in the stock market not taking time to learn how to create a…
Frank is an investor with a long time horizon and high risk tolerance. Which type of mutual fund would be best for his portfolio?
An equity fund
Which of the following statements is FALSE?
You should try to maximize your investment earnings right before you retire no
Imagine you are 5 years away from retirement. What type of mutual funds would be best for your portfolio?
Both B) A fixed income fund and C) A balanced fund with a high bond allocation
What does it mean to “invest in yourself”?
Investing in yourself means putting time and money toward your own personal growth
Which of the following statements is TRUE?
Your portfolio should have a higher allocation toward bonds and cash equivalents right before you retire
If you’re carrying debt that charges a low interest rate, you should prioritize paying off the debt and only make investment contributions when the debt is paid off.
False
You should sell all of your investments if the stock market goes down during a recession—especially since the stock market rarely recovers after a recession.
False
If you were looking to invest in a mutual fund focused on safety and minimal growth, what type of mutual fund would you invest in?
Both B) A fixed income fund and C) A money market fund
If you’re carrying debt, you should always pay the minimum loan amount so that you can maximize your investment contributions.
False
Imagine you are 25 years old and have a long investment time horizon. What type of mutual fund would NOT be best for your portfolio?
A money market fund
If you were looking to invest in a mutual fund with a mixture of growth and safety, what type of mutual fund would you invest in?
A balanced fund
A(n) _______ fund is a mutual fund that is primarily invested in stocks
not capital or money market/equity?
Investors with a ______ risk tolerance may have a long time horizon and are usually looking to maximize their returns in the stock market.
high
What kind of account would you need to open if you wanted to buy investments like stocks, bonds, and mutual funds?
Brokerage Account
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