Tax-Sheltered Accounts
This investment is only available for those who qualify for a disability tax credit.
RDSP (Registered Disability Savings Plan)
This type of stock allows the shareholder to vote on company decisions
Common Stock/Share
True or False: Investing has more potential for growth, but also more potential risk than saving
True
For point, must be able to explain why
The person opening an RESP is called the subscriber. The person who will receive benefits from the RESP is called:
The beneficiary
Sarah has an RRSP for herself, and a family RESP for her children, Emmi and Brock.
after 36 years neither child has attended post-secondary education. What is the best option for Sarah regarding her family RESP?
She should deposit it into her own RRSP
Which is the only tax-sheltered account where you can not only save money tax-free, but also withdraw money tax-free?
TFSA (Tax-Free Savings Account)
This investment is essentially buying a piece of ownership of a company, with the intention/hope that it will grow in value.
Stock
When it comes to risk management, why is it lower risk to invest in a stock index rather than individual stocks?
Diversification lowers overall volatility
A person involved in buying and selling stocks actively and frequently on the stock market is called a:
Trader
Dwight has a family reunion in Hawaii coming up in 3 years, and if looking for an easy and low-risk way to make some extra money for the trip. He has $5,000 in his savings, but he's worried that he won't be disciplined enough to leave it there untouched.
What's the best investment option for Dwight?
A GIC would be best for this time frame and for Dwight's needs--he wants to put money away where he can't touch it for a set amount of time. It is also easy and low-risk.
A bond could also be a smart option, but it is higher risk because the value moves with the market, and he could take it out early more easily
This account can stay open as long as 36 years; if it goes unused, it can be transferred to another beneficiary
RESP (Registered Education Savings Plan)
This investment is a loan given to a financial institution for a set term, after which you gain back your initial investment, plus any interest gained.
GIC (Guaranteed Investment Certificate)
What is the only potential risk or drawback involved in a GIC?
Need to take money out early--pay penalty
Regular shareholder payouts from company earnings are called:
Dividends
Angela is turning 18 and she wants to start taking advantage of her investment options ASAP
She's saved up about $1,500 through odd jobs and babysitting, but she doesn't file income tax yet.
What is Angela's best investment option right now?
Her best option is to open a TFSA account, as you have to be 18, and you do not need to earn an income
She should open an RRSP account once she starts earning a more steady and documented income
This account can be used to invest 18% or more of your income with no lifetime limit, but it must be closed by age 71.
RRSP (Registered Retirement Savings Plan)
This investment involves a loan to a company or government for a set term, throughout which you can accrue interest. This investment can also be traded on the stock market, causing value fluctuation.
Bonds
Which is riskier: an equity fund or a money market fund?
Equity Fund
For point, must explain why
When your investments begin to accrue interest and capital gains without any action required from you, this is called:
Passive Income
Kelly's mutual fund's assets total $100 million, and it owes $10 million in liabilities. The fund has 2 million units, of which Kelly owns 200.
What is the NAV per unit of this mutual fund?
Hint: Assets--liabilities /units = NAV
$45.00 per unit
Bonus: What is the value of Kelly's total investment?
FHSA (First Home Savings Account)
What happens to a fixed-rate investment when inflation rises?
It loses value
Which is typically the riskier option: a mutual fund or an ETF?
ETF
for point, must explain why
Regarding stock shareholder returns, what is a DRIP?
Dividend Reinvestment Plan; any dividends are automatically reinvested into buying more shares
Oscar decides to open a $5,000 GIC. He leaves it sit for 5 years, with a fixed interest rate of 4%.
At the maturation date, how much has Oscar earned on interest?
$1,000
$5,000x 4% =200
200x 5=1,000