Quiz: What Is Investing? 3 questions · 80% to pass 1. What is the primary difference between saving and investing?Saving uses a bank, investing does notInvesting involves risk in exchange for potential growth beyond inflationSaving is for rich people, investing is for everyoneThere is no meaningful differenceSaving preserves capital with minimal risk but typically earns below inflation. Investing accepts risk in exchange for the potential to grow purchasing power over time.2. Risk and return in investing are generally:Unrelated to each otherInversely correlated (more risk = less return)Positively correlated (more potential return requires more risk)Only related in stock marketsHigher potential returns generally require accepting higher risk. This is the fundamental tradeoff in all investing. Assets that guarantee safety (like FDIC-insured savings) offer lower returns.3. Inflation averaging 3% per year means a savings account earning 1% is:Growing your wealth slowlyMaintaining your purchasing powerLosing purchasing power at approximately 2% per yearBeating inflation because 1% is positiveReal return = nominal return minus inflation. At 1% interest and 3% inflation, your real return is -2%. Your account balance grows but buys less each year. Check answers Retake quiz Back to lesson Next lesson →