WorksheetsUnit 6 Review Per Fin
Total questions: 96
Worksheet time: 2hrs 43mins
A key difference between saving and investing is
Saving is for everyone, investing is for the wealthy
Your money is insured when investing, it is not in savings
Investing has a guaranteed return, savings does not
Saving is for emergencies & goals, investing is for long-term wealth
Why is it important to start investing as soon as possible?
You take less risk when you are young, so money will be safe
You have more time for your money to compound
Investing is an easy way to make quick money
Fees on investments are cheaper when you are younger
The possibility of losing all or part of your investment is known as
asset allocation
compounding
return
risk
Generally, how is risk related to return?
the lower the risk, the greater the possibility of a high return
the greater the risk, the greater the possibility of a high return
the greater the risk, the greater the possibility of a low return
risk and return have no relationship
A single share of ownership of a company is called a:
Bond
Mutual Fund
Annuity
Stock
Stocks are low risk investments options.
True
False
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
Fees are waived for investments held for over five years
You get a bonus from the company if you invest for five years
It keeps you from reacting to dips in the market and selling at too low of a price
Which of the following is a way to start investing?
Purchase stocks on your own
Pool money into a mutual fund managed by an advisor
Purchase part of an index fund
Hire a financial advisor to make a plan for you
All options are correct
All of the following are strategies to reduce risk EXCEPT…
Investing small amounts of money over longer periods of time
Hiring an investment manager who can make trades fast enough to beat the market
Making sure your investments are diversified
Holding your investments for at least five years
Which of the following is TRUE about owning a share of stock?
The value of a share is set by the company and never changes.
You have to return the share of the company you own typically after 5 years, otherwise, you pay a penalty fee each year.
Companies lose significant amounts of money every time someone buys a share.
Owning a share means you own a percentage of the company.
What is one way you can earn money by investing in bonds?
Through interest collected on your original investment.
Through dividends.
By selling your shares in the bond.
By purchasing a diversified bond type.
Which statement best describes how diversification impacts risk when you are investing?
Diversification means spreading your money across multiple investments, which decreases risk.
Diversification means spreading your money across multiple investments, which increases risk.
Diversification means putting all of your money into one investment, which decreases risk.
Diversification means putting all of your money into one investment, which increases risk.
What is the main advantage of compound interest compared to simple interest?
Compound interest earns interest on only the initial principal.
Compound interest earns interest on both the initial principal and the accumulated interest over time.
Compound interest does not earn any interest over time.
Compound interest is calculated using a simpler formula than simple interest.
What is a common investor behavior in a bull market?
Selling shares
Holding investments
Buying more shares
Avoiding risks
What typically drives a bull market?
Negative economic news
Positive news about the economy
Political instability
Natural disasters
What is the general trend of a bear market?
Upward
Downward
Stable
Volatile
What characterizes a bear market?
High investor confidence
Low unemployment rates
Pessimistic investor outlook
Increasing corporate profits
What is a common investor behavior in a bear market?
Buying more shares
Selling off investments
Taking more risks
Investing in new ventures
What typically drives a bear market?
Positive economic news
Negative economic news
Technological advancements
Increased consumer spending
What is the effect of a bull market on stock prices?
Stock prices fall
Stock prices remain stable
Stock prices rise
Stock prices become unpredictable
What is a bear market often associated with?
Economic growth
High unemployment rates
Increasing corporate profits
Low inflation
What can signal the end of a bull market?
Decreasing interest rates
Increase in consumer demand
Sharp increase in interest rates
Positive economic policies
Does a bear market mean the stock market is rising or going down?
rising
going down
staying the same
cross dimensional static drift
Trading generally refers to short-term prospects, while investing is more long-term
True
False
Traders generally focus on a company's potential, while an investor general focuses on a stock's technical factors
True
False
Investors are more likely to hold a stock than traders
True
False
In the long-term, investing will yield more consistent and certain profits than trading
True
False
Which of the following are reasons why investors might choose to invest in mutual funds?
diversification
professional management
to pool capital with other investors
diversification, professional management, and to pool capital with other investors
Which of the following best describes an index mutual find?
passively managed funds designed to mimic a specific market
mutual funds managed based on a person's anticipated year of retirement
mutual funds managed based on a preset ratio of stocks and bonds
mutual funds that attempt to earn rates of return that exceed the return of the market
Common stock market indices include the:
Dow Jones Industrial Average
Standard & Poor's 500 Composite Stock Price Index
Russell 2000 Index
Dow Jones Industrial Average, Standard & Poor's 500 Composite Stock Price Index, and Russell 2000 Index
What is diversification in the context of investing?
Investing all your money in a single stock.
Spreading your investments across various assets to reduce risk.
Focusing on stocks from a single industry.
Buying and selling stocks frequently.
A person who is interested in earning investment income from stocks is generally advised to buy stocks that pay _____.
dividends
premiums
interest
awards
Match the following
Stock
small ownership in company
Bond
Essentially an IOU
Mutual Fund
Consists of stocks and bonds
Capital Gains
Profit from an investment
Dividend
portion profits sent to shareholder
What sets index funds apart from other mutual funds?
Index funds have higher fees compared to actively managed mutual funds.
Index funds aim to match the performance of a specific market index rather than actively selecting investments.
Index funds are exclusively focused on investing in individual stocks of tech companies.
Index funds are known for their ability to provide guaranteed returns regardless of market fluctuations.
Which of the following statements about mutual funds is true?
Mutual funds are only invested in stocks.
Mutual funds are not regulated by any financial authorities.
Mutual funds pool money from multiple investors to invest in a diversified portfolio of securities.
Mutual funds guarantee a fixed rate of return to investors.
Alex, a high school senior, has $200 to invest for future education. Which investment fund is the most suitable for a low-risk, long-term investment?
Mutual Fund
Index Fund
Exchange-Traded Funds
Target-Date Fund
What is the fee structure for index funds?
High expense ratios
Low expense ratios due to minimal management
No fees
Only sales loads
How do investors earn from index funds?
Through rental income
Through index growth, dividends, and interest
Through capital gains only
Through interest only
What type of investments do mutual funds typically include?
Only stocks
Only bonds
A mix of stocks, bonds, and other assets
Only real estate
What is the management style of index funds?
Actively managed
Passively managed
Self-managed
Professionally managed
What is the management style of mutual funds?
Passively managed
Actively managed
Self-managed
Index-based
What are the different types of bonds?
treasury bonds, junk bonds, treasury bills, and convertible bonds
stocks, commodities, real estate, and mutual funds
credit default swaps, options, futures, and derivatives
government bonds, corporate bonds, municipal bonds, and savings bonds
What are the different types of bonds?
treasury bonds, junk bonds, treasury bills, and convertible bonds
stocks, commodities, real estate, and mutual funds
credit default swaps, options, futures, and derivatives
government bonds, corporate bonds, municipal bonds, and savings bonds
Who is called the "holder" of the bond?
The company that issues the bond
The investor who sells the bond
The investor who buys the bond
The regulatory authority
Who is the "issuer" of the bond?
The investor who buys the bond
The investor who sells the bond
The company that issues the bond
The regulatory authority
A bond's interest rate
Coupon Rate
Maturity
Par Value
Yield
The length of a bond
Coupon Rate
Maturity
Par Value
Yield
High yield, risky bonds
Junk
Corporate
Municipal
Savings
Bonds issued by local governments for improvement projects
Municipal
Savings
Treasury
Junk
A stockholder's share of the company's profit
Dividend
Par Value
Share
Yield
Reviews stock prices from 30 companies to determine the health of the stock market
Dow Jones
S & P 500
New York Stock Exchange
NASDAQ
When stock prices decrease as investors fear their ability to make a profit
Bull Market
Bear Market
Shares Market
When stock prices increase steadily as investors anticipate their ability to earn a profit
Bull Market
Bear Market
Dividends
Liquidity
What is a stock exchange?
A place where stocks are cooked and served
A platform for exchanging goods and services
A marketplace where securities, such as stocks and bonds, are bought and sold
A type of stock that can be exchanged for another stock
What happens when a bond reaches its maturity date?
The bond's interest rate increases
The bond is converted into stock
The principal is repaid to the bondholder
The bondholder must purchase additional bonds
Interest earned becomes part of the principal and then earns interest itself
risk
compound interest
401(k)
return
What is Dollar-Cost Averaging (DCA)?
A strategy to maximize short-term profits in the stock market.
An approach to purchasing investments in which the buyer spreads out their purchases to reduce the effect of market timing.
A method of selling investments at the highest possible price.
A tax-deferral strategy for retirement accounts.
Which of the following is NOT a benefit of Dollar-Cost Averaging?
It removes the pitfalls of market timing.
It can ensure you're ready to buy when events send prices higher.
It allows investors to ignore short-term volatility.
It allows investors to predict the future prices of securities.
Which of the following is a benefit of dollar-cost averaging?
It guarantees a profit from investments.
It takes emotion out of investing and helps prevent potentially damaging portfolio returns.
It requires constant market monitoring.
It is only suitable for short-term investors.
Who may find dollar-cost averaging especially useful?
Investors who prefer to time the market precisely.
Beginning investors who lack experience or expertise to judge the best times to buy.
Investors looking for a strategy that is suitable only during steadily rising market prices.
Investors who want to invest large sums of money at once to save on transaction costs.
What is the primary benefit of Dollar-Cost Averaging?
A) It guarantees a profit from investments
B) It allows investors to time the market perfectly
C) It lowers the average cost per share and reduces the impact of volatility
D) It increases the average cost per share
Imagine you have some money that you want to invest. You decide to put a certain amount into your investment every month, no matter what the price of the asset is. What is this investment strategy called?
Asset Allocation
Averaging Down
Diversification
Dollar Cost Averaging
Usually, when there is high demand (want) for ownership of a particular company or a product made by that company, what happens to the price of that company’s stock?
goes up
goes down
stays the same
Frank paid a total of $3,066.54 for 88 shares of stock. He sold the stock for $57.10 per share and paid a sales commission of $49.50. What is the profit or loss from the sale?
$1,999.16
$1,948.76
$1,928.67
$1,908.76
Jack paid a total of $5,800 for 200 shares of stock. He sold the stock for $45.50 per share and paid a sales commission of $49.50. What is the profit or loss from the sale?
$3,758.50
$5,250.50
$4,258.50
$3,250.50
Jerry paid a total of $1,800 for 50 shares of stock. He sold the stock for $10.52 per share and paid a sales commission of $12.50. What is the profit or loss from the sale?
loss of $1,687.50
loss of $1,286.50
loss of $1,986.50
loss of $1,586.50
Hubert paid a total of $3,250 for 250 shares of stock. He sold the stock for $11.70 per share and paid a sales commission of $7.00. What is the profit or loss from the sale?
loss of $332.00
profit of $332.00
loss of $432.00
profit of $432.00
If I buy a stock at $17 a share, then sell two years later at $86 a share. How much would I profit?
$70
$69
$86
$17
How much would it cost you to purchase 15 shares of Nike Stock that cost $129.08 each if there is a $50.00 fee?
$6469.00
$149.08
$879.08
$1986.20
You pay $1986.20 for 15 shares of Nike Stock.
A month later you see that the shares are now worth $135 each. How much of a profit did you earn?
$65.00
There was no profit.
$38.80
If Jonathan is earning 2% on an investment and inflation is increasing by 3%, what is happening to his purchasing power?
It's increasing
It's decreasing
It's not changing
Inflation and purchasing power are not related
What's the main difference between a Roth IRA and a Traditional IRA?
Roth IRAs have higher interest rates
Roth IRAs have you pay taxes upfront
Roth IRAs have higher fees
Roth IRAs are riskier investments
What is the main appeal of an index fund?
They are always actively managed to add a human touch
They are typically low cost and diversified investments
They are always managed by a robo-advisor to remove human bias
They give you partial ownership of a single company
What is the benefit of a target date fund (TDF)?
TDFs come with lower fees
TDFs adjust assets allocation automatically based on retirement year
TDFs are insured against loss for the first 5 years
TDFs guarantee a certain rate of return by the target date
What is Social Security?
Social Security is a private retirement fund run by your company
Social Security is another name for a 401(k)
Social Security is a government run retirement program
Social Security is a program that matches your 401(k) contributions
The younger you are they suggest that you should contribute in
Roth
Traditional IRA
Education
Your Career
401K's are sponsored by who?
The Government
The Employer
The Employee
The State you live in.
Which of these accounts do you set up at a brokerage firm or other financial institution?
401K
Pension
Individual Retirement Account
Why might a target date fund be a good option for someone who wants a hands-off approach to investing?
Target date funds automatically adjust your asset allocation as you get to retirement.
Target date funds are actively managed by a fund manager.
Target date funds only invest in low-risk bonds.
Target date funds offer low fees while also promising to outperform the market.
Which type of account will your employer often "match" your contributions?
Traditional IRA
401K
Roth IRA
Pension
Which of these accounts will NOT change if you switch jobs?
IRA
401K
Pension
Which of the below is an employer based retirement plan that both employees and employers contribute to?
Traditional IRA
Roth IRA
401K
Pension
If your employer offers a match, you should at least invest enough to take full advantage of that perk
No Thanks
Don’t say no to free money!
Just say No to free money!
What is the difference between a Traditional and Roth IRA?
A traditional IRA's contributions are not taxed until you withdraw them at retirement. A Roth IRA's your contributions are taxed when you invest.
A Roth IRA's contributions are not taxed until you withdraw them at retirement. A Traditional IRA your contributions are taxed when you invest them in.
Which IRA requires its owners to begin taking distributions at age 70 1/2?
Traditional
Roth
Which type of IRA has contributions that are tax-deferred?
Traditional
Roth
Tax-deferred means...
You do not have to pay income tax on the money until you begin to withdraw it at retirement
You pay income tax on the retirement contributions when you deposit them
5. Social Security is a government-guaranteed basic income for older Americans, funded through a special tax paid by workers.
True
False
When you sell your stock at a LOWER price than you paid for it
Capital gain
Capital loss
Pensions are offered in every job
True
False
What could be an important component of 401(k)s?
Be unaware of fees and investment options within the 401(k) plan
Ignore potential 401(k) options offered by future employers
Contribute at least enough to take full advantage of employer matching
Drones are just glorified kites.
Which feature is a key advantage of investing in an IRA?
Ability to invest in a wide range of assets
Automatic contributions from salary
Unlimited contributions each year
Guaranteed returns on investments
What is an advantage of a 401(k)?
Employer matching contributions can boost savings
No penalties for early withdrawals
Tax-free growth on contributions
Unlimited investment options
What is a consideration for IRAs?
No contribution limits
No tax implications
An individual can open one outside of their employer
Limited investment options determined by the employer
What is the main advantage of a pension?
Predictable income stream in retirement
High investment returns
Unlimited control over investment choices
Tax-free growth on contributions
