Personal finance

As a shareholder in a public company, what are the benefits available to you? A. You may receive dividends from the company, if the company pays them, and you have ownership of a portion of a company B. You must receive dividends from the company (all companies must pay them) and you can select members of the management team (e.g., the Chief Executive Officer) C. You can select members of the management team (e.g., the Chief Executive Officer) and vote for members of the Board of Directors

A

Elaine has been saving for a while and has $1,000 to invest. She would like this $1,000 to be the start of her retirement fund. What do you think is a good long-term investment strategy for Elaine? A. Invest $800 in a stock index fund and $200 in a bond index fund C. Invest $1,000 in a bond index fund B. Invest in the stock of her favorite company D. Invest her $1,000 in a regular savings account earning 0.05% interest since it is a safe investment

A

How is a bond different from a stock? * A. A bond is a loan you give to an organization while a stock is partial ownership in the company. B. Bonds are typically riskier than stocks but have the potential to earn higher returns. C. A bond is usually issued by smaller, startup companies while stocks are with well established organizations. D. Bonds are best for earning high returns while stocks are best for providing a stable source of income.

A

Why are Target Date Funds (TDFs) becoming an increasingly popular option to invest in? * A. Target Date Funds automatically adjust the allocation between stocks and bonds as you age B. Target Date Funds always perform better than the overall stock market C. Target Date Funds don't require you to have a brokerage account D. Target Date Funds are tied to a social media account so that you can share updates with your networks

A

An actively managed mutual fund...... A. Generally has lower fees than an index fund B. Is managed by a fund manager who charges a fee C. Always performs better than an index fund D. Is a mix of two types of stocks and two types of bonds to diversify your portfolio

B

How can someone make money from investing in a stock? A. They sell the stock for a lower price than what they bought it for. B. They receive dividends from the company they bought the stock of and/or they sell the stock at a higher price than what they bought it for. C. The stock loses value but the overall market experiences a positive return. D. They sell the stock for the same price they bought it for.

B

When investing in individual stocks, you should expect that.... A. Stock prices for a company are relatively easy to predict B. Unforeseen company events can have a dramatic impact on the stock price for a company C.You will have an informational edge by reading an article about a company you want to invest in D. Stock prices for an individual stock will be more stable over the long-term than prices for a diversified index fund

B

Why are Index Funds such a popular investing option? A. They are a mix of 2-3 individual stocks that can help you diversify your portfolio B. They provide a low-cost, diversified investment option that closely matches the overall return of a given index, such as the S&P 500 C. They are actively managed by a fund manager D. They are managed by robo-advisors that guarantee higher returns than the overall stock market

B

You bought 10 shares of stock in StreamingVideoCo for $45 per share. Two months later you sold the 10 shares of stock for $80 per share. What was your profit or loss on Streaming VideoCo stock? Assume that StreamingVideoCo didn't pay a dividend and that you didn't incur any trading fees during that period. * A. Loss of $800 B. Gain of $350 C. Loss of $450 D. Gain of $800

B

Nancy is a beginner level investor and is eager to get started. All of the following are things she should do EXCEPT... A. Invest in a low cost index fund B. Estimate how much she will need for retirement to determine how much she needs to invest each month C. Pick individual stocks to see if she can beat the market D. Invest in a diversified portfolio

C

To open a brokerage account, you.. A. Need to be over the age of 21 or you need a parent to open it for you. B. Have to set an appointment with a brokerage firm as you can only open it in person. C. Must be able to transfer money from a checking or savings account. D. Need proof that you have saved enough for an emergency fund first.

C

What is a brokerage account used for? ' A. It's an online portal that allows you to set up appointments with a fund manager. B. It's the account you use to pay any taxes you owe on money you earned in your investments. C. It's a type of account used to buy and sell stocks, bonds, and mutual funds. D. It's a special type of 401(k) plan that only some employers offer.

C

What kinds of cognitive biases and behaviors can prevent people from making smart investing decisions A. Staying calm when the market is experiencing a downturn. B. Buying stocks when prices are low and selling them when they're high C. Exiting the market because that's what everyone else is doing D. Investing in a diversified portfolio instead of trying to time the market

C

Which of the statements below BEST describes the relationship between risk and return when considering an investment? * A. Investors expect to earn a lower return when they invest in a risky asset B. Investors expect to earn a higher return when they invest in a low risk asset, like a bond C. Investors expect to earn a higher return when they invest in a high risk asset like stock in a small company

C

Why is compound interest more advantageous than simple interest A. Compound interest is harder to calculate, so those who use it earn higher profits for their efforts B. Compound interest means you have a fund manager who is compounding your returns without charging a fee C. Compound interest allows you to earn interest not only on the amount you have saved, but also on the interest you've already earned D. Compound interest has lower fees than simple interest

C

Why is diversification a recommended investment strategy? A. Investing in a diversified portfolio guarantees that you won't lose money with your investments. B. If you tell your fund manager to use diversification, they'll charge you lower fees. C. Diversifying your portfolio helps reduce risk. D. if you diversify your portfolio, you are guaranteed to make a high return.

C

Geraldo reviews his brokerage statement and sees the following two mutual fund investments that he made a year ago. ActiveFund20 had an average return (before fees) of 7% per year and an annual fee of 1%. A. PassiveFund500 had an average return (before fees) of 6.5% per year and an annual fee of 0.1%. Which investment had a better return for Geraldo (net of fees)? * B. ActiveFund20: It had an overall return of 8.0% while PassiveFund500 had an overall return of 6.6% B. PassiveFund500: It had an overall return of 6.6% while ActiveFund20 had an overall return of 8% C. ActiveFund20: It had an overall return of 7.0% while PassiveFund500 had an overall return of 6.5% D. PassiveFund500: It had an overall return of 6.4% while ActiveFund20 had an overall return of 6.0%

D

How does investing in the stock market differ from putting money in a savings account at a bank? A. Investing is always a less risky option than saving B. Investing is best for short-term situations like emergency funds; saving is best for the long-term C. Investing typically earns between 1-2% while saving generally earns between 5-7% D. Investing allows you to accumulate wealth for retirement while saving is best for short-term purchases or emergencies

D

Katrina works for Penny's Pickles, which offers a 401(k) match for up to 3% of her salary, which is $65,000 per year. In her budget, she only has $150 per month available to save for retirement. What should she do? A. Opt out of the 401 (k) plan since she doesn't have much to contribute: use the monev elsewhere in her budget. B. Contribute $75/mo to her 401(k) and $75/mo to an IRA, so that she's diversified. C. Save the $150/mo in a bank account until she has enough to max out her 401(k), X and then invest. D. Contribute the full S150/mo to the 401(k) because her company will match that full amount. doubling her investment every month.

D

Why is it important for you to understand YOUR risk tolerance before you start investing? A. It helps you decide if you want to participate in your employer's match program for your 401(k). B. It's recommended that people with a low risk tolerance shouldn't invest at all. C. If you have a high risk tolerance, you may be eligible for lower fees since you won't care if your portfolio drastically loses value. D. You should tailor your investment portfolio so that it assumes an amount or risk you are comfortable with

D

Jeff is 22 years old, just started his first job, and knows he should start 0/3 saving for retirement. He wants to divide his investments between stocks and bonds. Give Jeff specific asset allocation advice (using percents) and briefly explain why you are suggesting this plan.

He is young so can take more risk. 20% bonds, 80% stocks

Describe two factors that can influence an individual company's stock price.

If something goes bad or if the company/business starts to become more popular

Explain three key differences between index funds and mutual funds.

The cost, the type of management style, and investment

Explain why it is important to start saving for retirement in your 20s, when retirement is likely four decades in the future.

You are giving yourself more time to save and can be riskyier more when you are young

Your friend Jasmina is excited that you took personal finance this semester and comes to you for Investing advice. She lells you. "I'm totally new to investing. I kind of know what a stock and bond are but I dont really know which specific ones to invest in. I remember playing the stock market game in school so know the way to invest Is to select individual stocks to put your money In! But, I dont know WHERE go to actually start investing! When I started my job, our HR department told me that they offer a 401(k) plan and do a dollar-for-dollar match up to 3%....although I don't know what any of that actually means. I've also heard a lot of crazy stories in the news about Individual stock prices just plummeting because of an untoreseen event, and I m super worried that I'll lose my monev. What should I do? Where do I start? In your response below, -Answer Jasminas questions to make sure she gets the Investing knowledge shes looking for - Clarify any misconceptions she has about investing - Identify what steps Jasmina can take to start investing. Make sure you explain why she should take these -steps and how they will set her up for success. - Identify steps she can take in the future once she's more comfortable with Investing

•Invest in both one goes up other down •if you put 3% they do too •keep your money in stocks •use a little money •you will not lose all your money and don't need to be an expert •set financial goals, retirement fund •add more money