Font size
WorksheetsPer Fin - Investing
Total questions: 26
Worksheet time: 16mins
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%
A sum of money lent or invested, on which interest is paid?
credit
principal
investing
trading
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
Sandy is explaining what Social Security is to her younger brother. Which of the following descriptions should she use?
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
How does investing in the stock market differ from putting money in a savings account at a bank?
Investing is always a less risky option than saving
Investing is best for short-term situations like emergency funds; saving is best for the long-term
Investing allows you to accumulate wealth for retirement while saving is best for short-term purchases or emergencies
Which of the following statements is TRUE about compound interest?
Compound interest means you have a fund manager who is compounding your returns without charging a fee
Compound interest allows you to earn interest not only on the amount you have saved, but also on the interest you've already earned
Compound interest directly impacts how much you will be charged in fees
Which of the following accurately describes a difference between an individual bond compared to a bond fund?
A bond guarantees you a higher rate of return than a bond fund
A bond is issued by a company while bond funds only invest in government bonds
A bond is considered to be a less diversified investment than a bond fund
What kinds of behaviors can PREVENT people from making smart investing decisions?
Staying calm when the market is experiencing a downturn
Exiting the market because that’s what everyone else is doing
Investing in a diversified portfolio instead of trying to beat the market
Why is diversification a recommended investment strategy?
Investing in a diversified portfolio guarantees that you won’t lose money with your investments
If you tell your fund manager to use diversification, they’ll charge you lower fees
Diversifying your portfolio helps reduce risk
If you diversify your portfolio, you will definitely earn a high return
How is a bond different from a stock?
A bond is a loan you give to an organization while a stock is partial ownership in a company
Bonds are typically riskier than stocks but have the potential to earn higher returns
Bonds are usually issued by smaller startup companies while stocks are issued by well established organizations
Bonds are best for earning high returns while stocks are best for providing a stable source of income
An actively managed mutual fund…
Generally has lower fees than a passively managed index fund
Is managed by a fund manager who charges a fee
Always performs better than an index fund
Is a mix of two types of stocks and two types of bonds to diversify your portfolio
What is a brokerage account used for?
It’s an online portal that allows you to set up appointments with a fund manager
It’s the account you use to pay any taxes you owe on money you earned on your investments
It’s a type of account used to buy and sell stocks, bonds, and funds
It’s a special type of 401(k) plan that only some employers offer
How can someone make money from investing in a stock?
They sell the stock for a lower price than what they bought it for
They receive dividends or they sell the stock at a higher price than what they bought it for
The stock loses value but the overall market experiences a positive return
They sell the stock for the same price they bought it for
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 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
Nancy is new to investing and is eager to get started. All of the following are things she should do EXCEPT...
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
Which is NOT a good tip for beginning investors?
Invest with a long term focus and diversity.
Don't take advantage of the power of compound interest
Don’t be tempted by market distractions
It is important to realize that most times it is luck NOT skill that allows for successful stock pilling.
There are two main types of bonds Government and Cooperate, which are considered to be less risky?
Government
Cooperate
Neither
A market in which there is increased stock trading and rising stock prices
Bull
Bear
Money from the profits of a company that is paid out to its shareholders, typically on a quarterly basis
Stock
Saving Bond
Dividend
Fund
What is cash saved or collected for a specified purpose called?
Bond
Trading
Investing
Fund
Degree of uncertainty on how likely the investor is to make money on an investment?
Portfolio
Risk
Fund
Dividend
An investing tool for individuals to earmark funds specifically for their retirement?
Pension
Roth IRA
Individual Retirement Account (IRA)
401(k) Plan
A retirement savings plan, sponsored through your employer who will often match your contributions, that allows an individual to save for retirement and have the savings grow while deferring taxes until funds are withdrawn?
Target Date Fund
Traditional 401(k) Plan
Traditional IRA
Saving Bond
An individual retirement account that allows a person to set aside pre-tax income up to a specified amount each year?
Traditional IRA
Fund
401K Plan
Social Security
A part or portion of a larger amount which is divided among a number of people, or to which a number of people contribute?
Share
Stock
Bond
Mutual fund
Explain why it is important to start saving for retirement when you’re young, even though retirement is likely decades away.
