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WorksheetsReview 6A: Investing
Total questions: 30
Worksheet time: 18mins
All of the following are reasons to invest, EXCEPT…
To minimize the impact on inflation, which causes you to lose purchasing power
To earn a consistent rate of return with lower risk than typical savings accounts
To build wealth by reinvesting your returns and allowing them to compound
To earn higher average rates of return than you would in a typical savings account
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
An investor can best harness the power of compounding by doing all of the following, EXCEPT…
Making frequent trades
Starting to invest early
Reinvesting earnings
Minimizing risk
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
What is a stock?
A measurement of a company’s profits
An investment option that allows you to own a small piece of a company
An annual report that includes details about a company’s leadership and earnings
A low-risk savings option that can help you build an emergency fund
When reading a stock quote, which of the following metrics would give you the best idea of the total value of the company?
The stock ticker symbol
The price change of the stock, quoted as a percentage
The market cap
The stock’s opening and closing price for that day
Which of the following is TRUE about a stock split?
Stock splits impact the overall value of a company
Stock splits decrease the number of shares you own
Stock splits indicate that a company is doing poorly
Stock splits make a stock more accessible to a greater number of investors
Which of the following most accurately describes what a bond is?
A bond is a government loan made to an individual investor with the expectation that it will be paid back with interest
A bond is an investment in which a corporation lends an individual investor money with the expectation that it will be paid back with interest
A bond is a government loan made to a corporation with the expectation that it will be paid back with interest
A bond is an investment in which an investor lends money to a corporation or government with the expectation that it will be paid back with interest
Juan buys a bond with a fixed coupon rate of 3%. Six months later, similar bonds that are issued have a coupon rate of 4%. Which of the following is TRUE if he chooses to sell the bond before maturity?
The price of Juan’s bond will increase
More investors will be willing to buy Juan’s bond
The interest rate of Juan’s bond will increase to reflect the current market
The price of Juan’s bond will decrease
One difference between bonds and bond funds is…
Buying an individual bond is generally cheaper than buying a bond fund
A bond fund can help you diversify your investment portfolio
Bonds pay dividends to its investors
You receive the principal amount you invest in a bond fund after a certain amount of time
What does this fund primarily invest in?
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U.S. Treasury securities
An index of large-capitalization stocks
Corporate investment-grade bonds
An equal mix of stocks and bonds
What is a key risk of investing in this fund?
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This fund invests in very speculative, small companies
You are guaranteed only a small amount of interest income each year
If interest rates increase, this fund could lose value
The fund tracks the S&P 500, which is a risky short-term investment
What are this fund’s total net assets?
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$4.07 billion
$6.8 billion
$9.2 billion
$11.325 billion
Which benchmark is this fund tracking?
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Vanguard Intermediate Term Treasury Fund Index
Bloomberg US 5-10 Year Treasury Index
Issuer Bonds Index
Vanguard Fixed Income Group Index
What is the level of risk of this investment?
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Lowest risk
Low risk
Medium risk
High risk
This fund’s expense ratio is _______. You would pay _______ in fees on a balance of $10,000.
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0.01%; $1
0.20%; $20
3.78%; $378
4.07%; $407
What is the minimum investment for this fund?
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$3,000
$5,271
$10,000
There is no specified minimum investment
If you invested $10,000 in this fund in January 2014, how much would it be worth in December 2023?
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$10,000
$10,407
$11,325
$11,496
What was this fund’s rate of annual return in 2023?
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2.28%
4.07%
4.11%
217%
In the last 10 years shown, how many years did this fund have NEGATIVE returns?
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0 years
2 years
5 years
8 years
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
What is the average annual return if someone invested 100% in bonds?
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(a)
What is the average annual return if someone invested 100% in stocks?
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(a)
Calculate the range of potential annual returns if you invested 10% in bonds and 90% in stocks.
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(a)
Calculate the range of potential annual returns if you invested 90% in bonds and 10% in stocks.
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(a)
Calculate the range of potential annual returns if you invested 50% in bonds and 50% in stocks.
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(a)
