WorksheetsFA INVESTING STRATEGIES & EXPONENTIAL FUNCTIONS UNIT PRACTICE
Total questions: 25
Worksheet time: 50mins
The S&P 500 is...
An actively managed mutual fund
A diverse collection of stocks and bonds
An index of the 500 largest publicly traded companies in the world
An index of the 500 largest publicly traded companies in the United States
All of the following are true about robo-advisors, EXCEPT…
Robo-advisors generally have lower fees than a traditional financial advisor
Robo-advisors generally have a higher account minimum than a traditional financial advisor
Robo-advisors use an algorithm to automate the investing process
Robo-advisors generally invest your portfolio based on your goals and risk tolerance
Alberto has decided to invest his retirement money into a mutual fund filled with mid-sized US companies. The fund manager is…
A CEO at one of those midsize companies
The person who selects which stocks to include in the fund
The website where Alberto logs in to check his fund’s value
The budgeting software Alberto uses to make sure he has enough saved every month
All of the following are factors to consider when opening a brokerage account EXCEPT...
Your investing goals
Who will manage the account
Fees that will be charged
The location of the brokerage company
Alma recently started investing in a target-date fund with a planned retirement date that is 38 years in the future. How is the portfolio in her TDF most likely allocated?
Majority stocks and a small percentage of bonds
Half stocks and half bonds
Majority bonds and a small percentage of stocks
Her TDF allocation will depend on the specific securities she selects
Which fund will most working American citizens have access to at retirement?
A traditional IRA
A Roth IRA
A pension plan
Social Security
If you invest money into an index fund that tracks the Dow Jones Industrial Average, you would expect…
A lot of high fees, because there are only 30 companies in that index
To outperform most other investors because of the elite status of this index
Your returns to track the performance of 30 large US companies
Your fund manager to contact you on a regular basis with suggestions on whether tobuy or sell
Which statement about the investment fees associated with mutual funds is true?
You’ll pay a one-time fee when you start your investment portfolio with a mutual fund
You’ll only pay fees to your fund manager if your portfolio has a returnover 5%
Fees are typically set at 10 to 15%, annually, of the amount you haveinvested
Fees, compounded over the life of your investment, can substantially decrease your returns
Which type of fund is usually passively managed, can be traded throughout the day, and is bought directly from other investors like a stock?
Mutual fund
Robo-advisor
Exchange-traded fund
Target date fund
In 2022, Noah decided to start investing in a target-date fund at Alpine brokerage. They are 24 years old, have been working for 5 years, and are planning on retiring at 67. Which target-date fund should they choose?
Alpine Target Retirement 2060 Fund
Alpine Target Retirement 2065 Fund
Alpine Target Retirement 2070 Fund
Alpine Target Retirement 2075 Fund
Zora has $5,000 to invest. When assessing her goals, she decides that she wants to create a low-risk, low-volatility portfolio. Based on this assessment, a good strategy for Zora would be:
Lump Sum Investing
After Tax Averaging
Dollar-Cost Averaging
Average Paycheck Investing
Ash remembers learning about both 401(k)s and IRAs in his personal finance class during high school. He’s early in his career, and he can really only afford to fund one type of account with about $100 per month right now. What should he do?
Fund a 401(k) because his employer is offering a match, up to 3% of his salary
Fund a traditional IRA, because it will offer him, by far, the best tax advantages
Fund neither account, because $100 does not meet the minimum requirements for any retirement account type
Fund a savings account, because it will guarantee an interest rate, rather than leaving his retirement up to a risky investment option
Which of the following is an example of the bias of Chasing Trends?
Buying a stock when it has hit its lowest price of the year
Buying cryptocurrency because you saw a headline about it reaching its highest price ever
Researching the long term growth strategy of a company
Buying stock in an industry that is not represented in your portfolio to increase
diversity
Each of the following factors impacts how much money you will have available at retirement EXCEPT…
What percent of your income you invest each month
Whether you qualify for Social Security benefits
How old you are when you start investing
How often you log into your online brokerage account
Kendall completed her med school training 10 years ago and is now a successful highly-paid surgeon at a major hospital. What type of account would be most beneficial for Kendall to use to start saving for retirement, so she can enjoy time off after a stressful career?
Social Security, because she will pay into it throughout her career
A traditional 401(k), because it will reduce her taxable income now
A Roth IRA, because she can pay taxes on the money now and take it out tax-free later
A regular brokerage account, because tax advantages don’t matter that much
Evaluate log381
3
4
10
27
A disadvantage of using a robo-adviser might be that…
You are charged higher fees than if a human fund manager adjusted your portfolio
You may not be able to get advice from a human financial advisor when you want it
You don’t have any input as to how your portfolio is invested
You’ll be put on a waitlist to use the robo-adviser since there are only a handful of them to choose from
Sam is 22, just started his first full-time job, and is selecting his investments through his company's 401(k) plan. Why might a target date fund (TDF) be a good option for Sam?
A TDF is actively managed by a fund manager but comes with low fees
A TDF buys a single stock and bond so that beginner investors can practice day trading
A TDF is insured by the federal government, so Sam's money is protected even if the fund performs poorly
A TDF will automatically adjust his asset allocation based on the retirement year he has chosen
What is one question an investor should ask when deciding whether or not they would like to open a Roth IRA or a Traditional IRA?
Do I want to make a guaranteed return of 6% or 8%?
Do I want to pay taxes now or later?
Do I want to take advantage of my employer’s matching contribution?
Do I want to take on more or less risk?
Nancy is new to investing and is eager to get started. All of the following are things she should do EXCEPT...
Invest in a low cost index fund
Estimate how much she will need for retirement to determine how much she needs to invest each month
Pick individual stocks to see if she can beat the market
Invest in a diversified portfolio
Sanjana is explaining what Social Security is to her younger brother. Which of the following descriptions should she use?
Social Security is a type of retirement savings plan that you can open through a brokerage firm
Social Security is a government program that pools contributions from current workers to fund retirement support benefits to those who are eligible
Social Security is a type of retirement savings plan offered by some employers
Social security is a government mandate that requires employers to offer their employees a 401(k) or pension plan
As a shareholder in a public company, what are the benefits available to you?
You may receive dividends from the company, if the company pays them, and you have ownership of a portion of the company
You must receive dividends from the company (all companies must pay them) and you can select members of the management team (e.g., the Chief Executive Officer(CEO))
You can select members of the management team [e.g., the Chief Executive Officer(CEO)] and vote for members of the Board of Directors
You have ownership of a portion of the company and receive coupon payments from the issuer
Why are Index Funds such a popular investing option?
They are a mix of 2-3 individual stocks that can help you diversify your portfolio
They provide a low-cost, diversified investment option that closely matches the overall return of a given index, such as the S&P 500
They are actively managed by a fund manager
They are managed by robo-advisors that guarantee higher returns than the overall stock market
You buy a bond with a fixed coupon rate of 5%. A year later, similar bonds that are issued have a coupon rate of 3%. Which of the following is TRUE?
The price of your bond will increase
The demand for your bond will decrease
The price of your bond will stay the same
The interest rate for your bond will fall to 3%
Geraldo reviews his brokerage statement and sees the following two mutual fund investments that he made a year ago. ActiveFund20 had an average return (before fees) of 7.0% per year and an annual fee of 1%. PassiveFund500 had an average return (before fees) of 6.5% per year and an annual fee of 0.1%. Which investment had a better return for Geraldo (net of fees)?
ActiveFund20: It had an overall return of 8.0% while PassiveFund500 had an overall return of 6.6%
PassiveFund500: It had an overall return of 6.6% while ActiveFund20 had an overall return of 8%
ActiveFund20: It had an overall return of 7.0% while PassiveFund500 had an overall return of 6.5%
PassiveFund500: It had an overall return of 6.4% while ActiveFund20 had an overall return of 6.0%
