| A | B |
|---|
| Long-term investments, properly diversified, include the following mutual funds: | Growth, growth and income, international, aggressive growth |
| Which of the following is a good investment option? | Mutual funds |
| Define Diversification | The practice of dividing the money a person invest between several different types of investments in order to lower risk |
| Define Investing | The process of setting money aside to increase wealth over time for long-term financial goals such as retirement |
| Define Investment | Account or arrangement in which a person puts his/her money for long term growth; invested money should not be used for a suggested minimum of five years |
| True/False Money markets are great for your emergency fund due to their liquidity and stability. | True |
| True/False The purpose of war bonds is to finance military operations during war time. The last time the United States issued war bonds was during the Vietnam War. | False |
| True/False A mutual fund portfolio that is properly diversified will have all investment dollars located in just one of four different classes of financial assets. | False |
| True/False Single stocks and mutual funds carry the same amount of risk. | False |
| Define: Liquidity | The process of Quality of an asset that permits it to be converted quickly into cash without loss of value; availability of money |
| Define: Portfolio | A list of your investments |
| True/False You can start investing with a small amount of money. | True |
| True/False Good investment portfolios are extremely complex. | False |
| True/False You should start investing as soon as you have your college education funded. | True |
| True/False If you leave a job and have money saved in your employer’s retirement plan, always roll that money into an IRA using a direct rollover, which allows you to avoid taxes and penalties. | True |
| Define Risk | Degree of uncertainty of return on an asset; in business, the likelihood of loss or reduced profit |
| Define: Risk-Return Ratio | Relationship of substantial reward compared to the amount of risk taken |
| Define: Share | Piece of ownership in a company, mutual fund or other investment |
| Define: Stocks | Securities that represent part ownership or equity in a corporation |
| Define: Tax-Favored Dollars: | Money that is invested, either tax deferred or tax free |
| True or False: If you get into financial trouble, borrowing against your retirement plan is a good option. | False |
| True or False: Saving and investing have nothing to do with the amount of money you make. | True |
| True or False: The more liquid an investment, the more return | False |
| True or False: The less liquid the investment, the less return | False |
| True or False: The more liquid an investment, the less return | True |
| A reason that people need to save and invest is to: | Enable their money to make money |
| Company Xʹs board of directors has decided to issue a portion of its earnings to its shareholders. If you own stock in Company X, you can expect to receive a(n): | Dividend |
| Savings accounts and money-market accounts are most appropriate for: | Emergency funds and short –term goals |
| The benefit of diversification in your investments is: | Reduced Risk |
| To ensure that some of your retirement savings will not be subject to income tax upon withdrawal, you would contribute to: | A Roth IRA |
| A young investor willing to take moderate risk for above-average growth would be most interested in: | Mutual Funds |
| In some cases, employers will match the employee contribution, but you should fund your plan whether your company matches or not. This statement refers to: | 401 (K) |
| A retirement plan found in nonprofit organizations such as churches, hospitals and schools | 403 (B) |
| When buying and selling investments, you should not: | Switch your investment strategy often, based on market conditions |
| True or False: The terms bull market and bear market describe upward and downward market trends | True |
| True or False: The stock market is a generic term that encompasses the trading of securities. | True |
| True or False: The Dow Jones Industrial Average is one measure of the stock market. | True |
| True or False: Formed in 1792, the New York Stock Exchange (NYSE) is the smallest organized stock exchange in the United States | False |
| What is an Employee benefits packages? | A non-wage compensation package provided to employees in addition to their normal wages or salaries |
| A savings account sold by an insurance company, designed to provide payments to the holder at specified intervals, usually after retirement | Annuity |
| Choose One: Quality of an asset that permits it to be converted quickly into cash without loss of value; availability of money (risk, liquidity) | Liquidity |
| Choose One: Relationship of substantial reward compared to the amount of risk taken (risk-return ratio, investment strategy) | Risk Return Ratio |
| Choose One: A list of your investments (bank statement, portfolio) | Portfolio |
| Choose One: Piece of ownership in a company, mutual fund or other investment (401k, share) | Share |
| Choose One: Securities that represent part ownership or equity in a corporation (stocks, bonds) | Stocks |
| Choose One: Money that is invested, either tax deferred or tax free, within a retirement plan (tax -favored dollars, dividend) | Tax – favored dollars |
| Choose One: The government agency responsible for regulating the stock market (Federal Reserve, Securities Exchange Commission) | Security Exchange Commission |
| Choose One: Federal agency responsible for collecting taxes and for the interpretation and enforcement of the Internal Revenue Code (Internal Revenue Service, Federal Deposit Insurance Corporation) | Internal Revenue Service |
| Choose One: Distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders (interest, dividend) | Dividends |
| Choose One: A savings plan operated by a state or educational institution designed to help families set aside funds for future college costs (529 Plan, Guaranteed Investment Contract) | 529 plan |
| Explain why you should never invest while using borrowed money | You should never borrow money. Borrowing money for investing is particularly bad because it increases the risk of the investment and if you lose the money, you are still left with payments on it. |
| Explain the risk-return ratio | The risk-return ratio is used by investors to compare the expected returns of an investment to the amount of risk they take to get the returns |
| Why do single stocks carry a high degree of risk? Why do mutual funds carry less risk? | If you buy a single stock, there is no diversification in your investment. Investing in mutual funds ensures diversification and, therefore, lowers risk |
| What is the Rule of 72? How is it calculated? | The Rule of 72 is a quick way to calculate the length of time it will take to double a sum of money. Divide 72 by the expected interest rate to determine the number of years it will take your money to double |
| Is real estate a liquid investment? Explain your answer. | No. Real estate is the least liquid consumer investment. It takes time and consideration of the current market to sell real estate, thereby making it difficult to assess your investment dollars |
| Explain how compound interest works | Compound interest is interest paid on interest previously earned; It allows your investment to grow more quickly |
| Summarize the main points of a wise investment strategy | build a diversified portfolio, never invest using borrowed money, never invest purely for tax savings, develop a strategy based on your investment goals and stick to it, keep it simple, choose an investment broker with the heart of a teacher, learn the different types of investments and understand basic investment strategies, never invest in something you don’t understand, don’t fall for get -rich-quick schemes, invest only after you have your college education funded Side B, chpt 8.42 |
