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WorksheetsInvesting Unit Review (PF)
Total questions: 40
Worksheet time: 1hrs 20mins
A key difference between saving and investing is...
Saving is for everyone, investing is for the wealthy
Your money is insured when investing, it is not in savings
Investing has a guaranteed return, savings does not
Saving is emergencies & goals, investing is long-term wealth
Why is compound interest more beneficial than simple interest? (Choose 2)
Your money grows faster when it is compounded
You earn interest on your interest
Fees for compound interest are greater than simple interest
Compound interest is hard to calculate, so fewer use it
The relationship between risk and return can be stated as...
Higher risk indicates higher return
Higher risk indicates lower return
Lower risk indicates higher return
No relationship exists between risk and return
How can you make money on stocks? (choose 2)
A capital gain
Interest
Dividends
Holding the stock at least 3 years
Compound Interest
If interest rates rise, what will typically happen to bond prices?
Rise
Fall
Stay the same
A diversified portfolio is desirable because...
It limits investment choices
It's a good predictor on rate of return
It increases risk and return
It decreases risk
Which of the following accurately describes asset allocation? (choose 2)
Well-balanced portfolio of different stock classifications
Dividing among different asset categories based on risk
Dividing among different asset categories based on time
Chance your investment won't be worth as much in the future
Putting regular amounts of money into an investment account at specific time intervals is...
Compound interest
Diversification
Dollar cost averaging
Inflation
Which is NOT a good reason to buy a stock fund like the S&P 500?
Have a diversified portfolio
Have an investment with low fees
Don't have to monitor as closely as active managed account
You want to "beat the market" with your ROI
Why is it important to start investing as soon as possible?
You take less risk when you are young, so money will be safe
You have more time for your money to compound
Investing is an easy way to make quick money
Fees on investments are cheaper when you are younger
True/False: Investing in a diversified portfolio of stocks guarantees you will not lose money.
True
False
All of the following are reasons that it is important to start saving or investing early. Which is the least important?
Money accrues more interest if saved or invested earlier (longer time for compounding interest).
You never know when an emergency will occur, and you may need your savings when it does.
You need to make sure you can buy all the cool stuff that you see your neighbors, friends, or family buying so you can look cool too.
You will have to invest more money if you start later in order to achieve the same retirement goal. As you age, the “catch up” savings for retirement will be huge to compensate for not saving when you were younger
Most millennials have saved little to nothing for retirement. Fight the peer pressure and save early and often!
If the price of the share grows as the company grows, how does buying shares in a company benefit an investor?
An investor will be able to sell these share for a lower price and make a profit.
An investor will be able to sell these shares for a higher price and make a profit.
An investor will be able to enjoy free services from the company they bought shares from.
An investor will be able to put the company on their resume.
What does it mean to own individual stock?
You own a small portion of the company.
You get an individual discount to all the products or services of the company.
You are an employee of the company
You can make decisions about what the company does with their money
Which best describes a bond?
A loan you get from the bank
Something that holds stuff together
A loan given to a company or government by an investor.
Owning a small piece of a company or corporation
Which describes a mutual fund?
A fund which invests in a collection of stocks and/or bonds to provide greater diversification
A type of mutual fund that matches a financial market index such as the S&P 500
A type of investment that also tracks a financial market index; it also is a marketable security which means it trades on the market during market hours
Which describes a Index Fund?
A fund which invests in a collection of stocks and/or bonds to provide greater diversification
A type of mutual fund that matches a financial market index such as the S&P 500
A type of investment that also tracks a financial market index; it also is a marketable security which means it trades on the market during market hours
Which describes an ETF?
A fund which invests in a collection of stocks and/or bonds to provide greater diversification
A type of mutual fund that matches a financial market index such as the S&P 500
A type of investment that also tracks a financial market index; it also is a marketable security which means it trades on the market during market hours
Which are benefits of investing in a Target Date Fund (TDF)? (choose 4)
Low minimum investment
Professionally managed portfolios
Low maintenance
Lower management fees than an actively managed fund
Guaranteed positive returns
Which of the following statements about Mutual Funds is FALSE?
A majority of actively managed mutual funds "beat the
market" and are worth the fees they charge.
An advantage of investing in mutual funds is that you don't
have to pick individual stocks and bonds
Mutual funds that are actively managed by a fund manager
are trying to "beat the market" averages
Mutual fund managers typically charge fees of 1 - 2% on the
assets they manage
Which of the following are TRUE about Index Funds? (choose 2)
Index funds are a type of mutual fund.
Index funds have lower fees than actively managed mutual funds
Index funds try to "beat the market."
Index funds are actively managed by fund managers
What is the benefit of investing in an Exchange Traded Fund (ETF)?
ETFs guarantee a higher return than mutual funds
You have more control and flexibility because you can trade
ETFs anytime while the market is open.
An ETF allows you to pick which stocks and bonds you want in
the fund.
You can trade before the market closes for the day for a fee -
usually 1%
The interest rate of a bond is called...
Principal
Coupon
Par Value
Maturity Date
Which of the following statements BEST describes investing?
Putting $100 per month into an FDIC-insured bank account for short-term goals
Buying and selling stocks within the same day to take advantage of short-term price variation
Reducing the purchasing power of your money over time
Buying assets, like stocks, with the intention to hold them and grow your wealth over the long term.
What is the difference between a BULL and a BEAR market?
A BULL market is when the stock market is rising and the economy is booming, while a BEAR market describes a declining market and a receding economy
A BULL market is when there is a decline in the stock market and the economy is receding, while a BEAR market describes a rising market and a booming economy.
Why is it challenging to match your investing decisions with how the stock market is performing?
It is hard to predict trends, and trends can only be identified once they’ve already happened
The stock market is typically in a BEAR market for a specific period of time
You have to invest large amounts of money to have your decisions match the performance of the stock market
The stock market is typically in a BULL market for a specific period of time
Which of the following statements BEST describes the stock market?
Businesses listing their entire company for sale
Businesses selling partial ownership of their companies to raise capital
Investors buying stock in hopes of being hired by companies
People making donations to companies that need funding
During a BULL market…
Investors are pessimistic about how the stock market will perform
The economy is not doing as well
More investors are buying stocks, which causes stock values to increase
The unemployment rate in the country increases
Over time, the stock market has…
Experienced highs and lows but increased in overall value
Had slight ups and downs but stayed about the same in value
Rarely experienced changes and has maintained the exact same value
Gone through severe ups and downs with an overall decrease in value
By the end of a bond's maturity, the investor will have received…
Only the face value of the issued bond
The face value of the bond issued and interest payments
Only interest payments
Half the face value of the issued bond and interest payments
What is default risk?
The risk that the investor is not able to pay the face value of the bond.
The risk that the company or government is not able to make interest payments.
The risk that the investor demands the face value of the bond before the bond fully matures.
The risk that the company or government is unable to pay back the investor.
All of the following are true about bonds EXCEPT…
Bonds are considered a riskier investment option than stocks.
A bond is a loan given to a company or government by an investor who receives interest in return.
Companies and governments issue bonds to fund new projects or ongoing expenses.
Bonds are a way for investors to diversify their portfolios and generate additional income.
You've decided you want to sell a bond before its maturity date. Interest rates are currently higher than when you bought the bond. What will you likely have to do to make your bond more appealing to investors?
Lower the interest rate
Sell your bond at a discounted price
Increase the interest rate
Sell your bond at a higher price
All of the following are strategies to reduce risk EXCEPT…
Holding your investments for at least five years
Making sure your investments are diversified
Hiring an investment manager who you think can beat the market
Investing small amounts of money over longer periods of time
Leaving your investments in the stock market alone for at least five years is a good way to reduce risk because…
It allows your investments to earn more interest
It keeps you from reacting to dips in the market and selling at too low of a price
Fees are waived for investments held for over five years
You get a bonus from the company if you invest for five years
Which of the following is an example of diversification?
Putting the majority of your money into a savings account and investing the rest
Investing different amounts of money every month
Purchasing shares of stock in a variety of companies and industries
Using multiple investment managers to get different opinions
When talking about investing, what does it mean when someone refers to a fund?
A type of savings account that you can use for emergency expenses
A pool of money from shareholders that is used to invest in a collection of assets like stocks and bonds
A way to crowdsource money from people online to help pay for an expense
An amount someone has in their checking account
The goal of an actively managed fund is to outperform the market. What does this mean?
The fund is guaranteed to provide a rate of return that is lower than the overall market
The fund will match the overall return of the market
The fund is managed by a fund manager, who tries to beat the overall market’s rate of return
If the actively managed fund does not beat the market, the fund manager will pay you the difference
All of the following are true about a passively managed fund EXCEPT…
Fees for a passively managed fund are typically lower than those for an actively managed fund
Passively managed funds are generally seen as low risk investments
A passively managed fund guarantees the average return of the securities it includes
Passively managed funds are managed by a fund manage
