Chapter 8 Study Guide

Long-term investments, properly diversified, include the following mutual funds:

• Growth, balanced, international, bond

• Growth, growth and income, international, aggressive growth

• International, bond, aggressive growth, growth

• Growth, growth and income, bond, aggressive growth

Which of the following is a good investment option?

• Gold

• Viaticals

• Mutual funds

• Futures

Which statement is false about liquidity?

• The more liquid an investment, the more return

• The less liquid the investment, the less return

• The more liquid an investment, the less return

• Both A and B

A reason that people need to save and invest is to:

• Enable their money to make money

• Increase the money supply

• Be able to get anything they want

• Have an opportunity to talk with financial service providers

Company X's board of directors has decided to issue a portion of its earnings to its shareholders. If you own stock in Company X, you can expect to receive a(n):

• Investment

• Dividend

• Buy-out

• Yield

Savings accounts and money-market accounts are most appropriate for:

• Long-term investments like retirement

• Earning a high rate of return

• Emergency funds and short-term goals

• Savings accounts and money-market accounts should be avoided since they carry high risk

The benefit of diversification in your investments is:

• Reduced risk

• Reduced tax liability

• Increased return

• Increased risk

To ensure that some of your retirement savings will not be subjected to income tax upon withdrawal, you would contribute to:

• A 401(k)

• A Roth IRA

• An annuity

• A traditional IRA

A young investor willing to take moderate risk for above-average growth would be most interested in:

• Single stocks

• Bonds

• Mutual funds

• Real estate

In some cases, employers will match the employee contribution, but you should fund your plan whether your company matches or not. This statement refers to:

• Single stocks

• Roth IRA

• Bond funds

• 401(k)