Module 7 Quiz Personal Finance

Why are Target Date Funds (TDFs) becoming an increasingly popular option to invest in?

Target Date Funds automatically adjust the allocation between stocks and bonds as you age

How is a bond different from a stock?

A bond is a loan you give to an organization while a stock is partial ownership in the company.

Your friend Jenny wants to use a robo-adviser to manage her portfolio. What does this mean?

A computer software system is going to adjust her portfolio based on her preferences.

Why is compound interest more advantageous than simple interest?

Compound interest allows you to earn interest not only on the amount you have saved, but also on the interest you've already earned

Why is diversification a recommended investment strategy?

Diversifying your portfolio helps reduce risk.

Which of the following statements about Exchange Traded Funds (ETFs) is TRUE?

ETF prices can change throughout the day as they are exchanged on the market.

How does investing in the stock market differ from putting money in a savings account at a bank?

Investing allows you to accumulate wealth for retirement while saving is best for short-term purchases or emergencies

What is a vesting period?

The period of time it takes for shares in an employer retirement plan to be owned fully by the employee

Why are Index Funds such a popular investing option?

They provide a low-cost, diversified investment option that closely matches the overall return of a given index, such as the S&P 500

A disadvantage of using a robo-adviser might be that...

You may not be able to get advice from a human financial advisor when you want it