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WorksheetsEPF Fundamentals of Investing Quiz
Total questions: 46
Worksheet time: 4hrs 50mins
Discount brokerages offer buying and selling investments and offer investment advice.
True
False
Taxes must be paid on ALL investment profits in the year the unearned income is received.
True
False
When focusing on wealth accumulation, the rate of return earned on an investment should be higher than the rate of inflation.
True
False
An individuals investment philosophy changes throughout their lifetime.
True
False
Individuals with an aggressive investment philosophy are not willing to take on risk for the potential of higher returns.
True
False
Portfolio diversification is a method that helps an individual receive the highest return on investment.
True
False
A full service general brokerage firm usually charges lower commission fees than a discount broker.
True
False
You have budgeted and saved 6 months of emergency funds. You also have $4000 to invest. You think a technology stock will be a good investment in the next 12 months. What should you do with your $4000 while you wait to invest the money in 12 months?
Purchase a six month CD
Purchase a rare baseball card
Purchase a 10 year bond
Purchase a bunch of new clothes
Hide the money in my mattress.
Stocks are riskier than Bonds. Why would you want to invest in Stocks over a 20 to 30 year time period?
FDIC and/or FCUA will guarantee your investment up to $250,000 so there is no risk over long periods of time.
The FED will guarantee you don't lose your money if you stay invested over 20 years.
If you buy a stock for 20 or 30 years, the risk will go away completely
Stocks, on average, have a much higher return over a long period of time than savings accounts.
What is the advantage of investing in a mutual fund?
The FED will insure mutual funds against any losses.
Mutual funds only include high performance stocks and bonds.
Mutual funds diversify your portfolio by mixing stocks and bonds in the fund.
Mutual funds will pay a low guaranteed rate of return.
Pay Yourself First (PYF) means
Have money for you and your friends to eat at restaurants
Having auto payment of your monthly bills
Making rent and minimum credit card payments each month
Direct Depositing 10% of your pay into a savings or investment account
The FED can decide to increase or decrease interest rates. Why would the FED decrease interest rates?
So people will buy and borrow with low interest rates and the economy will respond in a positive way.
So less money will be available for buy or borrow
Because the FED has to lower interest rates every 5 years.
So less people will buy homes.
Jailyn's Personal Finance class has been discussing the importance of understanding liquidity and she is trying to explain the term to another student. Which statement is the most correct description of liquidity?
How quickly and easily an asset can be converted into cash.
The amount of savings available
A measurement of how much a person or household owns once all debts have been paid.
The amount of money needed to pay for the necessities and comforts currently enjoyed.
What idea should you think about as you decide to take advantage of your company's 401(k)?
The money you put in cannot be used for retirement.
The sooner you start investing, the more compounding will occur, leaving you with more money for retirement.
Your investment money is guaranteed up to $250,000 by FDIC and/or NCUA
If you contribute money to your 401(k), you can take it out any time without penalties.
Which of these assets are listed from MOST liquid to LEAST liquid?
Checking account, Bond, Real Estate
Money market account, bonds, savings accounts
Stocks, Checking accounts, money market account
Certificate of Deposit, real estate, bonds
In relation to the other options, how liquid is a savings account?
More liquid than cash
Less liquid than mutual funds..
More liquid than a Certificate of Deposit
More liquid than a checking account
Morgan needs a savings tool to help him manage his everyday purchases. The savings tool needs to be very liquid and accessible. Which of the following savings tools should Morgan choose?
Certificate of Deposit
Checking Account
Money Market Deposit Account
Any of the above savings tools would help him.
Which of the following is a feature of a certificate of deposit (CD)?
Funds deposited in a CD are held for a certain length of time.
Funds deposited in a CD have a tiered interest rate.
Funds deposited in a CD are very liquid.
Funds deposited in a CD can be accessed via check or debit card.
Your monthly expenses are $2000/month. How much money should you save for your emergency fund?
$2,000
$8,000
$12,000
$0, who needs an emergency fund when I can buy Yeezys?
A form of payment that is guaranteed to be as good as cash is a
Personal Check
Social Security Check
Money Order
Certificate of Deposit (CD)
What is a "growth" stock?
Will issue bonds to raise money.
Provide high rates of return guaranteed.
Will provide shareholders with dividends.
A stock which is expected to increase in sales and earnings.
What type of returns can you expect from Stocks?
(choose two)
Interest
Dividends
Capital Gains
What type of returns can you expect from Real Estate?
(Choose two)
Interest
Dividends
Rent
Capital Gains
What happens to the interest rate during the life of a 10 year bond that a person purchased paying 6% interest?
The interest rate will change when sold to another investor.
The interest rate will decrease each year.
The interest rate will increase each year.
The interest rate remains the same for the life of the bond.
A Certified Financial Planner needs
to have, at least, $1,000,000 in assets to manage.
work at a stock exchange
to be a lawyer
to pass exams to obtain a license.
What is true about buying stock?
The FED charges an annual fee.
There is NO guarantee the price of the stock will go up.
You have to hold the stock for at least 20 years.
There is no real risk in buying stock.
Why is it important that you diversify your investment portfolio?
So you can guarantee retirement.
So people don't talk bad about you.
So you can lower your portfolio risk.
So you can have more savings.
Your financial goals should:
Consider your current wants and needs only.
Should be short term goals only.
Be time bound.
Be handled by a financial advisor.
Now that you know about financial planning, what does good financial planning do for you?
Helps you decide how to save and invest.
Will take away all risk from your investments
Make you invest only in low risk investments
Absolutely guarantee your retirement.
Mutual funds are:
Designed to make investors keep them for their entire investing career.
Not part of your retirement investments
Are a way to diversify your portfolio
Designed to remove capital gains taxes from investments
You owe $350 on a credit card with 22% APR and you also owe $500 on another credit card at 12%. You make the minimum payment on each card and have $100 left over. What would you do with the extra $100?
Pay $100 on the 22% interest card.
Pay $100 on the 12% interest credit card.
Split it, $50/$50 on both cards.
Use the extra $100 to treat your friends to ice cream at Effies.
Just put the extra $100 in PYF.
How do Stocks pay you?
Interest
Dividends
Rent
with Penalties from other buyers
In shiny beads
All of the following are mandatory deductions from your GROSS income, except _________________
Federal Income Tax
State Income Tax
FICA
401(k) contributions
If you receive an email asking for your social security number, PIN, or other personal information, you should
call the Federal Reserve Bank
Reply immediately with the information
Call your bank with the number from your bank statement or walk into your local branch
Call the number from the email and give them your information
IF you buy stock at $100/share and sell the stock at $150/share, you have:
Realized a capital gain of $50/share.
Realized a capital loss of $50/share.
Sold your stock too early.
Sold your stock too late.
What is considered a long term investment with low risk?
Buying a used computer
Buying a rare baseball card
Buying Mutual Funds
Purchasing an individual stock
As teenagers, your spending is a big part of our economy. You need to be financially literate because
You have full time jobs.
You live rent free with your folks
You spend MONEY $$$$
You have car payments
Stock price is determined by the market (consumers). What might cause the price of a stock to change on a particular day?
The board of directors decides to increase the stock price.
Apple announces a new product or iPhone.
The CEO decides to lower the stock price so he can buy more.
Prices stay the same throughout the year.
The possibility that an investment will fail to pay the expected return or fail to pay a return at all
Investment Risk
Inflation
Inflation Risk
The rise in general level of prices of time, decreasing the value of money.
Investment Risk
Inflation
Risk
Deflation
Flatuation
A share in ownership of a company.
Stock
Bond
Mutual Fund
Index Fund
A form of lending to a company or the government.
Stock
Bond
Mutual Fund
Index Fund
When a company combines the funds of many different investors, then invests that money in a diversified portfolio.
Stocks
Bonds
Mutual Funds
Index Funds
A mutual fund that was designed to reduce fees by investing in the stocks and bonds that make up an index
Stocks
Bonds
Mutual Fund
Index Fund
Ownership of residential or commercial property or land.
Stock
Bond
Real Estate
Speculative Investment
Futures, Options, Collectibles
Mutual Funds
Index Funds
Speculative Investments
Brokerage Investments
