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WorksheetsMWLA Spring Quiz #1
Total questions: 39
Worksheet time: 31mins
All of the folowing are true about bonds except...
Bonds are a way for investors to diversify their portfolios and generate additional income.
Companies and governments issue bonds to fund new projects or ongoing expenses.
A bond is a loan given to a company or government by an investor who receives interest in return.
Bonds are considered a riskier investment option than stocks.
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.
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
The higher the risk associated with a bond, the (a) likely a corporation might default on paying the investor. Interest rates for riskier bonds tend to be (b) so that investors are (c) willing to take on that risk. A riskier bond usually comes from a corporation that has a (d) credit rating.
Government bonds tend to be riskier than corporate bonds.
When overall interest rates rise (to 10%), the bond you already own (with 5% coupon rate) becomes (a) valuable to potential buyers, so its price will (b) .When overall interest rates fall (to 2%), the bond you already own (with 5% coupon rate) becomes (c) valuable to potential buyers, so its price will (d) . Generally, the longer the duration of the bond, the (e) the chance the bond price may change due to changes in yield.
Organize these options into the right categories
Less risky
Regular interest payments
Principal is returned to investor
Changes in interest rates can impact you if you plan to sell the bond before its maturity
Expensive because you buy an entire bond
Diversified
Cheaper than buying a bond
Pays dividends
Principal investment is not returned
More Risk
The higher the risk the greater the rewards.
Trading stocks daily is a way to lower risk.
Investing in multiple asset classes, like stocks, bonds, and cash investments is a great way to diversify your portfolio.
Use dollar-cost averaging to consistently invest small amounts of money over long periods of time and to avoid investing all of your money on an expensive day
Putting all of your money into a single stock is a great way to diversify your assets.
Diversifying is a great way to minimize risk.
Investing in a fund is a more diversified approach than investing in a single stock or bond.
Organize these options into the right categories
No one manages the fund it is based on the performance of an index.
Match the return of the market
Lower risk
A human
fund manager
Outperform the market
Higher Fees
Lower Fees
Higher risk
Over a recent 20 year period, what percent of pros beat the market?
20%
6%
43%
87%
It is not risky to put all your money into a single stock if it is a really good one.
Too little risk ay cause you to feel anxious about not reaching your financial goals.
Too much risk may cause you to make bad decisions based on emotion.
Risk tolerance will not help you make decisions you're comfortable with.
Bank accounts give you access to buy things like stocks, bonds, and mutual funds.
An online brokerage account gives you access to make investment decisions on your own whereas a managed brokerage account either has a human fund manager or a robo-advisor that manages your money.
What types of income can you use in retirement to support yourself?
Job Income
Sales Income
Passive Income
Stocks
Bonds
Index Funds
Savings
Investment Income
Pension Income
Social Security
Welfare
Food Stamps
Which statement best describes what Social Security is and how it works?
Social Security is a mandatory payroll deduction for current workers who then receive the retirement benefit on an annual basis.
Social Security is an optional program to allow retirees to continue contributing to their individual retirement accounts.
Social Security is a government program that pools contributions from current workers to then provide retirement support benefits to those who are eligible.
Social Security is a federal health insurance program for retired workers.
It’s important to invest for retirement because Social security benefits may run out.
Why will you need slightly more income in each year of your retirement?
Your expenses increase the longer you are in retirement.
Your rate of return on investments is guaranteed to increase in retirement, so you can spend more each year.
You are required to withdraw more money each year from your retirement account
You should take the increasing price of goods and services over time into account.
How can the length of your retirement impact how much you might need to save for retirement? (hint: choose two right answers)
The longer your retirement, the MORE money you'll receive in government stipends and programs.
The longer your retirement, the LESS you need to have saved.
The longer your retirement, the MORE you need to have saved.
The longer your retirement, the LESS money you'll be able to withdraw each year.
Which of the following should you do when taking your rate of return into account?
Assume an aggressive rate of return because that is what the market guarantees.
Assume an aggressive rate of return because it accounts for other income streams, such as Social Security.
Assume a conservative rate of return so that you can plan the worst but hope for the best.
Assume a conservative rate of return because that is how the market is going to perform.
IRA's are offered by employers and they match the employee contribution.
With an IRA, you have to manually transfer (or set up auto transfers) to your account. With a 401(k), you can have your contributions deducted from your paycheck
Select the best definition of an IRA.
An IRA is a tax-advantaged investing tool set up by individuals for retirement savings
An IRA is a retirement plan offered to you by your employer
An IRA is an investment type with a fixed rate of return
An IRA is a retirement savings plan that guarantees a fixed rate of return
Select all of the statements that are a true characteristic of a Traditional IRA. (hint: choose 2 correct answers)
Any money you save into a Traditional IRA is tax deductible
There is no limit on the amount of money you can contribute to a Traditional IRA
You are taxed on the money in your Traditional IRA when you withdraw it in retirement (it is taxed as ordinary income)
You never have to pay taxes when contributing money to a Traditional IRA
Select the TRUE characteristic of a Roth IRA.
There is no limit to the amount you can contribute to a Roth IRA
The Roth IRA has been around longer than the Traditional IRA (the Roth debuted in the 1930s)
The capital gains, interest, & growth of a Roth IRA can be withdrawn tax-free in retirement
You are taxed on the money you withdraw in retirement from your Roth IRA (it is taxed as ordinary income)
True or False: You can only have ONE IRA account, so it is important to weigh the pros and cons of a Traditional vs a Roth IRA and choose wisely!
What is meant by the term "robo-advisor?"
An app that you download and access from your smart device to manage your investments
A robot artificial intelligence who is trained to run an investment brokerage better than humans
A set of computer programs that automatically makes adjustments to finance portfolios
A fund manager who copies the same investments with every client so often it seems robotic
What advantages do robo-advisors have over their human counterparts? (Choose TWO)
They can perform tedious tasks far more frequently than a human advisor would have time to do
They typically charge much lower fees than the average human advisor would charge
They are not subject to the same government restrictions as human advisors
They have access to better investment choices than human advisors are allowed to invest in
TRUE or FALSE Robo-advisors are not a good choice because they just match the market and most professional managers are able to beat the average market returns.
Which of these statements about robo-advised investing is TRUE?
You have to choose between human connection or robo-advisor automation because it's impossible to find a brokerage that can offer a little of both
Some robo-advisors can be customized to account for your specific investment values like renewable energy or sustainable industries
While robo-advisors can make investing much simpler and more convenient, they rarely perform better than humans in the long-run
Robo-advisors are pretty much all the same, so you never have to worry about how they work or that they might change
