WorksheetsUnit 5 Econ Test Review
Total questions: 39
Worksheet time: 27mins
Why is it important to diversify your investments?
If you diversify your portfolio you will make riskier investments and get higher returns
If you diversify your portfolio, you won't lose money in your investments
Mutal Funds charge less for diversification
Diversifying your portfolio helps reduce risk
How is investing in the stock market different from putting your money in a savings account?
Investing is to accumulate wealth, while saving is best for short term goals
Investing is less risky than saving
Investing is for short-term goals, saving is best for long-term goals
Investing generally earns 1-2% return, while saving usually earns 5-7%
You buy a share of “E” stock for $50.Two months later, you sell the stock for $80. What was your profit or loss on the “E” stock? (assume no dividend or trading fees)
capital loss of $80
capital gain of $30
capital loss of $50
capital gain of $800
What is a stock?
a loan you give to an organization
a financial product offered by banks and credit unions
An interest-bearing deposit account held at a bank or other financial institution
A stock is partial ownership in the company
How do you earn money by investing in stocks?
Sell the stock for a lower price than you bought it for
The stock loses value
Through dividends and/or sell the stock at a higher price than you bought it fo
Sell the stock for the same price you bought it for
Why is it important to know your risk tolerance before you start investing?
It helps you decide if you want to participate in your employer's match program for your 401k
You should only invest at the level of risk your are comfortable with
People with high risk tolerance may be charged lower fees
People with a low risk tolerance should not invest at all
What should you ask yourself before deciding to invest in a Roth or Traditional IRA?
Do I want to make a guaranteed return of 6-8%?
What type of investments do I want to make?
Do I want to pay taxes now (Roth) or later (Traditional)?
Do I want to pay taxes now (Traditional) or later (Roth)?
At what age can you start making "catch up"contributions to your retirement account?
50+
70 1/2
55+
You can always contirbute more
Which retirement account is for public employees like teachers and school administrators?
403b
Roth IRA
401k
Traditional IRA
Which retirement account is NOT funded with pretax contributions?
403b
401k
Roth IRA
Traditional IRA
How are Roth IRA accounts taxed?
returns are taxed at normal income tax rates
there are no taxes on Roth IRA's
contributions are pretax, returns are taxed at withdrawal
contributions are made with after tax dollars, returns grow tax free
What will happen if someone takes money out of a retirement account such as a 401k or 403b before they are 59 1/2 years old?
the person will have to pay taxes AND a penalty
the withdrawal will be taxed at the regular income tax rate
the withdrawal will not be taxed
there are no penalties or taxes when withdrawing money before age 59 1/2
What is the name of the amount of money that must be taken from certain retirement accounts at age 70 1/2?
voluntary distribution
optional minimum distribution
required minimum distribution
you are never required to withdraw money from any retirement account
Which of the following statements about Exchange Traded Funds (EFTs) is true?
an ETF is a single stock you buy in the stock market
actively managed ETFs have very low fees
ETFs are traded once a day after the market closes
ETF prices change throughout the day as they are exchanged in the market
What type of retirement account is ONLY for people working in the public sector?
401k
IRA
403b
TRADITIONAL IRA
Which of the following accounts are taxes DEFERRED?
Roth 401k
403b
Roth IRA
Which of the following accounts do you pay taxes NOW (before contributions)?
401k
Traditional IRA
403b
Roth IRA
If the account has ROTH in front of it, what does that mean?
Taxes are DEFERRED to a later date
You pay taxes NOW
If an investment has a high risk, it usually has potential for a _______ return.
Low
High
If an investment has low risk, it usually has a _______ return.
High
Low
What type of insurance would help cover the damages of a car accident?
Car Insurance
Health Insurance
Life Insurance
Disability Insurance
Insurance _______ risk and _______ risk.
Avoids; reduces
avoids; transfers
transfers; shares
reduces; retains
What is a monthly payment made to the insurance company based on your coverage limit?
Premium
Deductible
Coverage Limit
Policy Number
What is the highest amount your insurance company will pay for a claim that your policy covers?
Premium
Deductible
Coverage Limit
Policy Number
What is "the amount that you are expected to chip in towards the final cost before insurance pays"?
Premium
Deductible
Coverage Limit
Policy Number
The higher the deductible, the _______ the premium.
higher
lower
The lower the deductible, the ______ the premium.
higher
lower
What type of insurance protects againts financialloss caused by the cost of acident or illness?
Car
Life
Health
Disability
What type of insurance provides financial protection to a fmaily when the insured person dies?
Disability
Life
Car
Health
What type of insurance provides income during a specified periof when a person is unable to work because of illness or an accident?
Health
Property
Car
Disability
What type of insurance protects the homeowner from loss caused by fire, theft, and storm damage of the structure and the possessions within the structure?
Home owners/Property
Car
Life
Theft
Your renter’s insurance premium is $10/month and has a $2,000 deductible. A thief breaks into your apartment and steaks your $800 Hair Dryer. How much will your insurance company pay to replace your stolen item?
$800
$2,000
$0
$200
Zack has a deductible of $1,000. He is in a wreck and the cost to repair the damage to the car is $2,000. How much does the insurance company have to pay for the repairs to his car?
$1,000
$2,000
$0
$1,500
Jane has a car insurance policy where she pays $150 per month to have the insurance and must pay $800 if she ever has to use the insurance due to an accident. What does the $150 payment represent?
Premium
Deductible
Coverage Limit
Policy Number
If you are young and healthy, you would pick a health insurance plan that has a ______ premium and a ______ deductible.
Lower; Higher
Higher; Lower
I insure my house for $200,000. I pay $500 a year and my deductible is $1,000. A tree falls on the house and the damages cost $6,000 to fix. How much does the insurance company need to pay for the damages?
$6,000
$5,000
$500
$20,000
I insure my house for $200,000. I pay $500 a year and my deductible is $1,000. A tree falls on the house and the damages cost $6,000 to fix. How much will I need to pay for the damages?
$500
$20,000
$1,000
$6,000
What is a bond?
ownership of a part of a corporation
a financial product offered by banks and credit unions
a loan made by an investor to a borrower
nvestments that allow you to pool your money together with other investors to purchase a collection of stocks, bonds, or other securities
What are Mutal Funds?
investments that allow you to pool $ with other investors to purchase a collection of stocks, bonds, or other securities
a loan made by an investor to a borrower
partial ownership of a company
a retirement account
