Marketplace test guide
If you're carrying debt, you should always pay the minimum loan amount so that you can maximize your investment contributions.
False
Which of the following steps is NOT involved in going public?
Finding private investors to invest
Ann is an investor with a short time horizon and low risk tolerance. Which mutual funds would be best for her portfolio?
Fixed income funds & Money market funds &Balanced funds with a high bond allocation.
When a private company wants to offer stock on the stock market, they go through the _______ process.
Initial Public Offering
In finance, the acronym IPO stands for:
Initial. Public. Offering.
Equity funds, index funds, and market cap equity funds are best for which type of investor?
Investors with a long time horizon.
Fixed income and money market funds are best suited for which type of investor?
Investors with a short time horizon.
Jason is 58 years old, has strong financial health, a short time horizon, and an average risk tolerance. Which asset allocation you recommend?
45% stocks and 55% bonds/cash equivalents.
Yena is 38 years old, has average financial health, an intermediate time horizon, and an average risk tolerance. Which asset allocation would you recommend?
65% stocks and 35% bonds/cash equivalents.
Miguel is 25 years old, has low financial health, a long time horizon and a high risk tolerance. Which asset allocation would you recommend?
85% stocks and 15% bonds/cash equivalents.
Which of the following is an advantage of going public?
Ability to attract many investors
Which of the these situations are more likely to happen in a GOOD economy?
Alex just graduated from technical school and took a new job that pays her a high salary.
If you were looking to invest in a mutual fund with strong growth, what type of mutual fund would you invest in?
An equity fund
What is diversification?
An investment strategy that mixes a wide variety of investments from different categories within a portfolio.
Imagine you've used your own money to develop your business idea. Now you need more funding to keep growing. Which financing method would be available to you at this stage?
Angel investing
The ____ phase in the business cycle is a period when the level of business activity declines and GDP falls.
Contraction
Why might an investor want to invest in the stock market?
Investing in companies through the stock market offers a chance to share in their profits.& Investing in the stock market usually offers a higher return than interest earned on a savings account.
What does it mean to "invest in yourself"?
Investing in yourself means putting time and money toward your own personal growth.
Which of the following is NOT a reason why people invest in the stock market?
Investing is a guaranteed way to make money.
Which of the following statements about investing is FALSE?
Investing is best when you're looking to maintain the value of your money with a little bit of growth.
Which of the following is NOT an example of investing in yourself?
Investing your money in the stock market.
Which of the following behaviors are more likely to happen in a GOOD economy?
Jordan takes out a loan to start a new business.
Investors with a ______ risk tolerance may have a short time horizon and are usually looking to maintain the value of their investments with minimal growth.
Low
Investors with a ______ risk tolerance may have a an intermediate time horizon and are usually looking for a mix of safety and growth in their investment portfolio.
Medium
Which of the following statements about monetary policy is TRUE?
Monetary policy adjusts the amount of money and credit available in the economy.
Which of the following statements about monetary policy is FALSE?
Monetary policy adjusts the tax policies in the economy.
What is monetary policy?
Monetary policy is policy set by the Central bank to influence the amount of money and credit available in the economy.
How is a mutual fund different than an index fund?
Mutual funds are actively managed while index funds are passively managed.
Which of the following is NOT a consideration when determining your asset allocation?
Portfolio diversification
If the government and Central Bank don't use economic policy, what could happen?
Prices could skyrocket, making goods more difficult to buy.&Unemployment could rapidly rise, making it harder to find a job.&GDP could rapidly fall, creating a recession in the economy.
How comfortable you feel taking the risk of losing your money refers to:
Risk tolerance
Which of the following is an example of investing in yourself?
Signing up for an online class.
A _____ is a share of ownership in a company.
Stock
Which of the following statements about stocks is FALSE?
Stocks pay out interest annually.
Which of these situations are more likely to happen in a BAD economy?
The Adobo Grill restaurant has to lay off two employees because business is very slow.
Imagine you own a successful startup company that's been doing well for several years. You think you can grow your company if you had more industry connections. What method of financing would be best for your company at this stage?
Venture capital
Which of the following statements about debt financing is FALSE?
When a bank gives a company a loan, they become partial owners of the company.
Which of the following statements about bonds is TRUE?
When a bond matures, you get the full amount you loaned back with interest.
When would it be a good idea to invest your money instead of putting it in a savings account?
When you won't need the money for a long time.
When would it be a good idea to put your money in a savings account instead of investing it?
When you're looking to maintain the value of your money with a little bit of growth.
In order to implement expansionary policy, the Central Bank and government must _____ interest rates, ______ government spending, and _____ taxes.
decrease, increase, decrease
In order to implement contractionary policy, the government and Central Bank must ______ government spending, _____ taxes, and ______ interest rates.
decrease, increase, increase
In order to implement expansionary policy, the government and Central Bank must ______ government spending, ______ taxes, and ______ interest rates.
increase, decrease, decrease
What is an equity fund?
mutual fund that is primarily invested in stocks.
Imagine you are 5 years away from retirement. What type of mutual funds would be best for your portfolio?
A fixed income fund & A balanced fund with a high bond allocation
Frank is an investor with a long time horizon and high risk tolerance. Which type of mutual fund would be best for his portfolio?
An equity fund
Your retirement portfolio should have a higher allocation toward stocks right before you retire.
FALSE
Why is it important to adjust the asset allocation of your investment portfolio as you get closer to retirement?
To protect your investment earnings in case the stock market goes down.
Which of the following statements is TRUE?
Your portfolio should have a higher allocation toward bonds and cash equivalents right before you retire.
A well diversified portfolio needs about 3 to 5 stocks from different categories.
False
An increasing unemployment rate is associated with a growing economy.
False
Companies already on the stock market get to choose the price of their stocks.
False
Historically, long-term returns of the stock market have been negative.
False
If the stock market goes down during a recession, you should sell all of your investments to minimize your losses.
False
If you're carrying debt that charges a low interest rate, you should prioritize paying off the debt and only make investment contributions when the debt is paid off.
False
The state of the economy alone can predict how the financial market will perform.
False
When a company "goes public," only a small amount of investors are allowed to invest in the company.
False
When the economy is doing well, the financial market is also guaranteed to do well.
False
You can diversify your portfolio by investing all your money in one industry.
False
You should sell all of your investments if the stock market goes down during a recession—especially since the stock market rarely recovers after a recession.
False
When a company is attempting to go public, they will hire an investment bank to...
Figure out how much money to raise & Create a prospectus
Steadily increasing inflation is associated with a growing economy.
True
The price of company stocks already trading on the stock market are determined by supply and demand.
True
When a company "goes public," investors anywhere can buy shares of ownership in the company.
True
When companies go public they get a direct say in choosing the price of their stocks.
True
In the past 90 years, the stock market has had positive returns, averaging 10% annually.
True
If you were looking to invest in a mutual fund with a mixture of growth and safety, what type of mutual fund would you invest in?
A balanced fund
What kind of account would you need to open if you wanted to buy investments like stocks, bonds, and mutual funds?
A brokerage account
If you were looking to invest in a mutual fund focused on safety and minimal growth, what type of mutual fund would you invest in?
A fixed income fund &A money market fund
Imagine you are 25 years old and have a long investment time horizon. What type of mutual fund would NOT be best for your portfolio?
A money market fund
A ______ is a fixed income investment that represents a loan from an investor to a borrower.
Bond
Imagine you are an entrepreneur starting a new video game company. What kind of financing would you most likely use to test out your new business idea?
Bootstrapping
What method of financing do entrepreneurs often use when they are first developing their business idea?
Bootstrapping
Which of these situations are more likely to happen in a GOOD economy?
Carlos was able to finish a design bootcamp and interview at many companies until he finds the job he likes best.
A _____ is a short-term investment that is considered highly liquid.
Cash Equivalent
Which of the following statements about cash equivalents is FALSE?
Cash equivalents are considered relatively risky compared to stocks.
Which of the following statements about the IPO process is FALSE?
Companies must seek out private investors for the company.
Which of the following statements about equity financing is FALSE?
Companies often have to pay interest when they use equity financing.
Which of the following behaviors are more likely to happen in a GOOD economy?
David invests his money in a new tech startup company.& Galaxy Fitness, a locally-owned gym, takes out a loan to buy new equipment.
___________ is an investment strategy that mixes a wide variety of investments from different categories within a portfolio.
Diversification
Which of the following statements about economic policy are FALSE?
Economic policy is used to ensure all businesses are following regulations.
A(n) _________ is a person who starts a new business and assumes all the risks and rewards of running the business.
Entrepreneur
Which of the following statements about entrepreneurs is TRUE
Entrepreneurs are willing to take risk.
Which of the following statements about entrepreneurs is FALSE?
Entrepreneurs aren't exposed to any risk when starting a new business.
What is the difference between debt financing and equity financing?
Equity financing involves selling shares of ownership in the company while debt financing does not.
How is an index fund different than an exchange-traded fund?
Exchange-traded funds trade directly on stock exchanges while index funds do not.
The ____ phase in the business cycle is a period when the level of business activity rises and GDP grows.
Expansion
Which of the following behaviors are more likely to happen in a BAD economy?
Fresh Mart, a local grocery store, had to lay off employees to keep costs down.
Which of the following statements about GDP (gross domestic product) is TRUE?
GDP measures the total value of all the finished goods and services produced in a country over a certain period of time.
Which of the following are disadvantages of going public?
Giving up some ownership& Need to meet expensive legal requirements Losing some control over company decisions
Imagine you own an established startup with growing profits. You are looking for funding to greatly expand company operations. What method of financing would be best for you?
Going public
______ is the total value of all the finished goods and services produced in a country over a certain period of time.
Gross domestic product (GDP)
Investors with a ______ risk tolerance may have a long time horizon and are usually looking to maximize their returns in the stock market.
High
People invest in the stock market because:
The time value of money states that money available now is worth more than the same amount of money later because of its potential to grow. & Investing in companies through the stock market offers a chance to share in the profits of those companies. &Investing in the stock market generally offers a higher return than interest earned on a savings account.
What is GDP (gross domestic product)?
The total value of all the finished goods and services produced in a country over a certain period of time.
What are some common traits good entrepreneurs have?
They take calculated risks.&They try to solve problems by using new products and processes.
If an entrepreneur says they are using "bootstrap financing," what are they referring to?
They used their own money to start their business.
How long you plan to keep your investments in your portfolio refers to:
Time horizon
Why might the government and Central Bank use policy to manage the economy?
To avoid a depression in the economy.
What is contractionary policy used for?
To discourage individuals from spending.
What is contractionary policy used for?
To fight rapid inflation in the economy.
What is expansionary policy used for?
To stimulate growth in the economy.
The ____ phase in the business cycle is a period that marks the end of declining business activity.
Trough
A decreasing unemployment rate is associated with a growing economy.
True
A well-diversified portfolio needs about 20-25 stocks from different categories.
True
Even if the economy is declining, the financial market can still do well.
True
If the stock market goes down during a recession, you should focus on the long-term horizon and ensure your portfolio is well-diversified to minimize losses.
True
If you're carrying debt that charges a high interest rate, you should prioritize paying off the debt instead of maximizing your investment contributions.
True