Intro to Investing
Risk vs. Return
Diversification
Investing for Retirement
Misc.
100
True or False: All investments eventually increase in value if held long enough. a) True b) False
What is False
100
If you created a graph with investment risk on the x-axis and investment return on the y-axis and plotted points for two different investments, a line going through the points would probably be: a) Positively sloped b) Negatively sloped c) Have a slope of zero
What is a) Positively sloped
100
True or False: If you buy enough different stocks, you can diversify out all risk in the stock market. a) True b) False
What is b) False
100
401K plans are so named because: a) You can only contribute up to $401,000 b) Of the tax law that authorizes them c) Over 400,000 people have taken advantage of them
What is b) Of the tax law that authorizes them
100
Front end loads: a) Are disguised as 12b-1 fees b) Are paid to the mutual fund company after you have held the fund for a long time and you are ready to sell the fund to get your investment back c) Can be compared between different mutual funds by adding the expense ratio and the 12b-1 fee that you find in the prospectus d) Are paid to the mutual fund company when you first purchase the fund
What is d) Are paid to the mutual fund company when you first purchase the fund
200
True of False: Savings accounts generally offer a higher yield than money market accounts. a) True b) False
What is b) False
200
In general, buying an individual stock from a mid-sized company is less risky than: a) Buying a U.S. savings bond b) Buying a "penny" stock c) Buying an S&P 500 mutual fund d) Buying a bond mutual fund
What is b) Buying a "penny" stock
200
Diversification is good because: a) It focuses investments on a single stock to take advantage of growth potential b) Mutual funds have higher fees than individual stocks c) Interest rates rise and fall d) It spreads the risk of investment
What is d) It spreads the risk of investment
200
Which of the following is a benefit of an employer-sponsored plan? a) Contributions are not taxed b) Employers often match contributions c) All of the above
What is c) All of the above
200
A money market account: a) Pays a fixed rate of interest b) Never has a minimum deposit requirement c) Can have a minimum deposit requirement and variable interest, and generally pays a better interest rate than a savings account
What is c) Can have a minimum deposit requirement and variable interest, and generally pays a better interest rate than a savings account
300
Savings accounts at banks are protected by: a) FDIC insurance b) Risk and return curves c) An annual percentage rate d) Mutual fund returns
What is FDIC Insurance
300
Someone who can tolerate a risky investment would: a) Wake up in the middle of the night worrying about the investment b) Be very concerned that a downturn would wipe out the long-term gains c) Understand that an investment that fell when the entire market fell was not necessarily a bad investment d) Keep all money in a savings account at a bank for long-term growth
What is c) Understand that an investment that fell when the entire market fell was not necessarily a bad investment
300
A bear market: a) Is when people rush to buy stocks, sending prices surging upward b) Is when bond prices and interest rates are not as attractive as the growth in the stock market c) Can be an opportunity for long term investors to buy stocks of well run companies at lower prices d) Happens every year at about the same time, and can be avoided with proper attention to the calendar
What is c) Can be an opportunity for long term investors to buy stocks of well run companies at lower prices
300
Which of the following is an example of a defined benefit plan? a) A pension b) Roth IRA c) 401(k)
What is a) A pension
300
Investing in a global stock fund is a good idea to: a) Focus all risk on the U.S. economy b) Keep your portfolio dependent solely on the U.S. dollar c) Diversify into municipal and corporate bonds d) Diversify holdings to spread risk outside the U.S. economy
What is d) Diversify holdings to spread risk outside the U.S. economy
400
Money market refers to: a) A collection of highly liquid short term investments b) The market on which different currencies are bought and sold c) The market the Federal Reserve uses to buy up old bills and coins
What is a) A collection of highly liquid short term investments
400
The Dow Jones Industrial Average is a collection of: a) Thirty U.S. stocks b) Thirty municipal bonds c) Thirty globally diverse stocks d) Thirty U.S. industries
What is a) Thirty U.S. stocks
400
Over about 40 years, your portfolio should probably: a) Change from higher-risk to lower-risk investments b) Sell every holding each year to figure out how well you are doing c) Grow equally well in all sectors, or it is a bad financial plan d) Become less and less conservative, increasing in risk from year to year
What is a) Change from higher-risk to lower-risk investments
400
Which of the following is an example of a defined contribution plan? a) 401(k) b) Keogh plan c) Both a and b
What is c) Both a and b
400
If you have a long-time horizon for investing, you should: a) Lean toward high-risk investments with high-return potential b) Keep at least 75% cash or money market funds for immediate availability c) Own only one stock d) Diversify into savings accounts and U.S. savings bonds
What is a) Lean toward high-risk investments with high-return potential
500
Inflation is: a) A number set by the government that causes prices to rise b) A number measured by the government that describes the changing prices of everyday goods. c) Automatically subtracted from interest rates quoted by banks for their savings accounts
What is b) A number measured by the government that describes the changing prices of everyday goods.
500
Inflation is: a) Always exactly 5% per year b) The reason most people get ahead by saving money in a mattress c) The rise in the cost of purchasing everyday goods d) The annual rate of return on a savings account
What is c) The rise in the cost of purchasing everyday goods
500
Your return with a diversified portfolio will: a) Be exactly 11.3% every year b) Rise and fall, but have less risk than a smaller number of stocks and a smaller number of sectors and asset classes c) Fall if a single company in your portfolio goes out of business d) Beat absolutely every other investor
What is b) Rise and fall, but have less risk than a smaller number of stocks and a smaller number of sectors and asset classes
500
If you are a self-employed professional, which plan would work for you? a) Employer-sponsored 401(k) b) Traditional pension plan c) Keogh plan
What is c) Keogh plan
500
US savings bonds: a) Are purchased for face value and pay interest above that amount b) Are worth face value at maturity c) Are risky investments
What is b) Are worth face value at maturity
M
e
n
u