Economic test
Preferred stock is the type of stock people usually talk about
False (Common stocks)
One of the advantages of investing in stocks is that it is lack of control.
False (Disadvantages)
The stock market makes it impossible to grow small initial sums of money into ones
False (Possible)
Why are some aspects of futures contracts that make them appealing to farmers? To investors?
Farmers prefer using future contracts as they guarantee a buyer for their crop. Investors on the other hand like to use futures contracts because they are simple.
List 2 factors that should consider before investing mutual funds.
Fees and Short-term focus
How many people founded the Chicago Board of Trade and when?
It was founded in 1848 by 82 Chicago merchants.
What are things to consider before investing in a collectible?
Price, Cost to Maintain/Condition, Age/Rarity, Budget, Market value.
List one example for pros and cons of investing in options
Pro- Allows hedging your investments Con- Requires more than just a basic knowledge of the stock market
Define currency pair and provide an example.
Two currencies whose values are compared (Ex: EUR/USD, USD/JPY)
What is one consideration before investing in a Stock?
Who are the company's competitions? Will they be able to outlast the competition?
Foreign currency options give the option holder right to buy or sell a fixed amount of foreign currency at a specific price on/before a chosen date in the future.
the option holder , specific price
What are you not allowed to invest in an RRSP?
Precious metals and Real Estate
Explain 3 factors that the economy.
-A boom in the economy (GDP) will increase the value of its currency -Large supply—Demand could lead to currency's devaluation -Trade Deficit—increases the supply of a country's currency and could lead to devaluation
What are two ways to mitigate risk in your portfolio?
-Carefully selecting securities to invest in or government bonds. -Diversification
List 2 limitations or restrictions for RRSP
-December 31 of the year in which you reach age 71. -18% of your earned income from the previous year.
List two advantages of real estate investment
-It is tangible, so an investor can see and touch the property -Can receive monthly income form tenants.
List 2 differences between TFSA and RRSP
-RRSP is long term and TFSA is short term -Whenever we can invest in TFSA, but RRSP has limitation.
What are options
A contract that gives the buyer the right, but not obligation to buy and sell.
What is a futures contract?
A future contract is an agreement to buy or sell a commodity on a prearranged time and price.
What is an investment portfolio?
A mixture of any or all investment types that are all held simultaneously.
What is a mutual fund
A mutual fund is a pool of money from a group of investors used to create a portfolio of different stocks, bands and other securities as per the fund's prospectus.
What is a dividend? What are some of its benefits?
A sum of money paid regularly by a company to its shareholders out of its shareholders out of its profits. It is safe.
Write one advantage and one disadvantage of investing in gold
Advantage- Gold savings are not affected by inflation Disadvantage- difficult and expensive to store in large quantities
List one advantage and one risk of the FOREX market
Advantage- Open 24 hours a day with solid liquidity throughout the day Risk- Lack of Regulation, High Volatility
One advantage and one disadvantage
Advantage- Tax benefits Disadvantage- Requires management
List one of each advantage and disadvantage of investing mutual funds
Advantage-Advanced portfolio management Disadvantage-Management abuses
What is IRA
An Individual Retirement Account
What is the 20 Year Itch?
An Item may become a collectible within twenty years if they meet all the necessary condition.
What is an exchange?
An exchange is a marketplace in which securities commodities, derivatives and other financial instruments are traded
Why is over-diversification unhealthy for your portfolio?
Anything beyond that can be counter-productive, as over-preventing downside risks will also prevent profit potential.
What are the three conditions an item must satisfy in order to be considered a commodity?
Be interchangeable, Be usable upon delivery, Have a price that varies enough to justify making a market for it.
Why are bonds issued?
Bonds are a crucial way of government/organizations to borrowing money to fund projects and hire people.
Define Bonds
Bonds are basically a loan to organizations and companies from you for a certain amount of interest that you get paid back at the end of the maturity date.
What are call and put in the options?
Call-to buys something at a specified price Put-is to sell something at the specified, exercised price
Define "restricted range of investments"
Certain types of investments that are not allowed
What is difference between Commercial and Industrial real estate?
Commercial real estate- the type of lot that consists of non-residential buildings Industrial real estate- a lot where car washes, storage units, and businesses that have sales from customers using it temporarily, not permanently.
What are three different ways that people invest in gold?
Common Stocks and Mutual Funds, Futures and Options, and Bullion
What are two differences between an aggressive and conservative portfolio?
Conservative Portfolio- prioritize safety, a shorter time-frame Aggressive Portfolio- high-risk and high-reward, a larger time frame
Which of the following is does not affect real estate market?
D) number of real estate agencies
When is the last opportunity to contribute your RRSP?
December 31st of year you reach the age of 71
What is the difference between direct and indirect real estate investment?
Direct investment is purchasing the real estate property Indirect investment is buying units or shares from Real Estate Investment Trusts
What is one major advantage of investing in a collectible?
Global investment and it is desirable for its uniqueness
List types of bonds
Government bonds and Zero coupon bonds
When is it a good time to invest in Real Estate?
High foreclosures because of more renters, low real estate prices, and when inflation is beginning to occur.
What does an RRSP act as?
It acts as a tax shelter
Where did the use of gold begin?
In the Middle East where the first known civilizations began
What are three common characteristic of precious metals?
In-corrosive, malleable, conductible, and formable.
Why does it indicate the economy is not healthy when the gold price is high?
Investors flock to gold when they want to protect their investments from either a crisis or inflation.
What are precious metals?
It is rare, naturally occurring metallic chemical elements of high economic value.
What makes leverage different from the other investment strategies?
Leverage is an investment performed to increase the investment reward using borrowed money.
What is one major disadvantage of investing in a collectible?
Maintenance and Hard to find a buyer
What is the Foreign Exchange Market? What is another name for this market?
Market where one buys or sells the currency of country A with currency of country B. AKA. "Currency Market"
What is the role of option market?
Medium of exchange for options contracts allowing the holder the right to sell or buy an underlying commodity on an open market.
Why is portfolio diversification important?
Mitigates risks
List 2 different types of mutual funds.
Money Market funds and Balanced funds
Is gold price always an indication of inflation/contraction? If not, explain it.
No, this doesn't always apply as law as supply and demand must be considered
List one of the main factors that determine the value of a collectible
Nostalgia- when people want to reminisce about their past
What are real estate agents for?
Open house done by agent
What is bullion?
Physical gold which are meaning coins and bars
Between a TFSA and an RRSP, which is more suitable for a high income earner?
RRSP
What is the most complex type of exchange?
Reverse Exchange
What is it called when one sells bonds at a price higher than its face value?
Selling at a premium
List three places you can invest in collectibles?
Sports, Toys, games and dolls, Art, Coins, etc.
What is the most popular collectible?
Stamps, coins, and fine arts.
What is a stock?
Stocks are shares in the ownership of a company have access to a percent of a company's assets or earning.
Define maturity date
The maturity date is the time when the face value of the bond will be paid to the investor.
What benefits do stocks give to companies in the Stock Market?
To expand their wealth and grow their business in exchange
Why do some investors buy some commodities even though their main goal is to, for example, invest in stocks? What is this called?
Traders mainly purchase commodities for one reason: to provide a safety net for other investments. Investing with the intention of lessening potential losses is known as "hedging".
Stock is a share in the ownership of a company
True
The best time to buy stocks is probably after the market crush
True
It is possible to make money if a commodity's price falls. How? What is this called?
When selling, you would sell someone else's stuff and hope the price drops. If it does, you then buy back the goods to pay them back and keep any profits. This method is known as "going short"
When is a good time to invest in precious metals?
When the economy and stock market are unstable.
Are RRSP plans completely exempt from taxes?
Yes, any income you earn in the RRSP is usually exempt from tax as long as the funds remain in the plan.
What is the yearly contribution limit for a TFSA?
You can contribute $5,000 per year to a TFSA