Adulting 101 - Finance

ROI stands for ______________.

• rate of interest

• return of interest

• return on investment

• rate of investment

What is DCA or Dollar-Cost Averaging?

• It's when you buy something more than once and then figure the average cost.

• It's when you invest a pre-determined amount at a pre-determined time for a long period of time.

• It's when you invest a certain dollar amount and compute the average price you paid after the purchase.

• It's when you buy an asset with dollars before being converted into other assets.

What is Market Cap or Market Capitalization?

• It's the total price of an asset class.

• It's the price you pay for an asset.

• It's the value of an asset before taxes.

• It's the valuation of an asset.

What is the formula for computing Market Capitalization?

• Total Supply X Market Price = Market Cap

• Total Supply - Market Price = Market Cap

• Market Price / Total Supply = Market Cap

• Total Supply + Market Price = Market Cap

What does it mean "to diversify" or Diversification?

• Putting all your eggs in one basket so that you don't have as much risk.

• Not putting all your eggs in one basket because you can't decide what to invest in so you invest in many different assets.

• Not putting all of your investments or money into one asset or asset class due to the risk of losing all of your money.

• Diversification means to buy an asset consistently over a long period of time.

Before investing, it's good to implement the meaning of the phrase, "Bet on the Jockey - not the horse," because....

• you never know which horse will win a horse race.

• you never want to bet on just one investment.

• it's important to know how good the product is and it's track record before investing.

• it's important to know who the leader of the company is and his or her track record before investing.

When investing, what is Risk Tolerance and how does it relate to Volatility?

• Risk Tolerance is being able to comfortably handle the ups and downs, or Volatility, of an investment.

• Risk Tolerance means that the more risk there is, the less Volatility there is.

• The more Risk Tolerance you have, the less Volatility you can handle.

• The less Risk Tolerance you have, the more Volatility you can handle.

Which best describes what Passive Income is and an example of it.

• Passive Income is the process of receiving income while performing a task. An example is working as a nurse or doctor.

• Passive Income is the process of receiving income without physically performing a task in order to receive the income. An example is owning income producing real estate.

• Passive income is also known as making money while you sleep which means that you get paid for sleeping on the job or while at work. An example is working the night shift and being able to sleep during your shift.

• Passive income is the best type of income because you actively earn it. An example is buying and selling products online.

Rich Dad's Cash Flow Quadrant by Robert Kiyosaki has four quadrants, what are they?

• Quadrants E - S - C - I

• Quadrants B - E - S - D

• Quadrants S - E - I - D

• Quadrants E - S - B - I

What does each Cash Flow Quadrant letter stand for?

• E for Employee - S for Sole Provider - I for Investor - B for Business Owner

• S for Sole Provider - E for Employer - B for Buyer - I for Investing

• E for Employee - S for Self-Employed - B for Business Owner - I for Investor

• E for Employer - S for Self Motivated - B for Business Venture - I for Investing