personal finance unit 7 test
The following are examples of diversification (select all that apply)
-Investing in multiple companies within a type of security (ex: small, medium, and large cap stocks) -Investing in multiple types of securities (stocks, bonds, etc.)
11.One difference between bonds and bond funds is...
.A bond fund can help you diversify your investment portfolio
12. All of the following are strategies to reduce risk EXCEPT
.Hiring an investment manager who you think can beat the market
13. Leaving your investments in the stock market alone for at least five years is a good way to reduce risk because
.It keeps you from reacting to dips in the market and selling at too low of a price
30. Investors report this as being one of the biggest downfalls of robo-advisors
.Lack of personal touch
22. All of the following are common investing strategies EXCEPT
.New York Stock Exchange
31. All of the following are best practices to use when evaluating a mobile investing app EXCEPT...
Create an account first, then conduct research on the company behind the app
Which of the following statements about the stock market is true?
Over time, the stock market averages 6-7% growth per year.
24.In retirement, it's common to rely on income from all of the following sources EXCEPT...
Government loan
29. Which type of retirement account is an investment option for ANY young person?
.Traditional IRA
28. Which of the following describes a Roth IRA?
A retirement account anyone can open that you fund with money that you've already paid taxes on, so it grows tax-free.
32. Capital gains taxes
Are taxed differently depending on if you sell them before or after holding them for 12 months
An investor can best harness the power of compounding by doing all of the following, EXCEPT
Making frequent trades
Which of the following statements describes investing?
.Buying assets, like stocks, with the intention to hold them and grow your wealth over the long term.
Juan buys a bond with a fixed coupon rate of 3%. Six months later, similar bonds that are issued have a coupon rate of 4%. Which of the following is TRUE?
.The price of Juan's bond will decrease
27. All of the following are advantages of a 401(k), EXCEPT
.You can invest your 401(k) into a wider variety of asset types than you could with an IRA.
All of the following are reasons to invest, EXCEPT...
To earn a consistent rate of return with lower risk than typical savings accounts
21. Your investor profile is a snapshot of what kind of investor you are and takes into account:
Your time horizon and risk tolerance
How can you make money from investing in a stock? Select all that apply.
-Receive dividends from the company -Sell the stock for more than your purchase price
Which of the following most accurately describes what a bond is?
A bond is an investment in which an investor lends money to a corporation or government and it must be paid back with interest.
20. Which of the following correctly orders investment options from lowest to highest risk?
A government bond, an index fund tracking the S&P 500, an ETF tracking the technology sector, an individual stock
18.What are the advantages of investing in a mutual fund, rather than an individual stock?
A mutual fund is diversified, so your investment is lower risk
All of the following are risks of owning an individual stock, EXCEPT
Demand could unexpectedly increase for your company's stock
16. How do exchange traded funds (ETFs) differ from actively managed mutual funds?
ETFs can be traded throughout the day while actively managed mutual funds cannot
Why is investing a more powerful tool to build long-term wealth than saving?
Investing yields higher average rates of return, so your investments will grow more than they would in a savings account.
19. When choosing a mutual fund to invest in, all of the following are important factors to consider, EXCEPT...
Length of the fund fact sheet
15. All of the following are true about a passively managed fund EXCEPT...
Passively managed funds are managed by a fund manager
17.Why might a target date fund be a good option for someone who wants a hands-off approach to investing?
Target date funds automatically adjust your asset allocation as you get to retirement
26. Eli is planning ahead for retirement. They should consider all of the following factors when determining how much they'll need in retirement EXCEPT...
The current balance in their checking account
What is the advantage of starting to invest at a young age?
You have a longer time horizon, so your money has more time to compound and grow.
25. Which of the following statements is TRUE about the state of retirement in the U.S.?
.Many people may need to invest to build wealth and to support themselves in retirement
23. Which of the following is a characteristic of a brokerage account?
.No penalties for withdrawing your money
