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Janice works at a company with a 401(k) match program. She earns $50,000 per year and the company agrees to match her contributions at the rate of $0.50 for every $1.00 she contributes, up to a maximum company contribution of 5%. Which statements below are TRUE? Select all that apply. □ In order to maximize (make the most of) the company 401(k) match, Janice needs to contribute $5,000 (10% of her salary) per year to the program □ The maximum the company will contribute to Janice's 401(k) is $2,500. □ The amount that Janice contributes to her 401(k) plan will increase her taxable income and therefore increase the amount of taxes that she needs to pay □ The way to think about a 401(k) match program is that the company is giving you "free money" to encourage you to save for retirement. □ The investments you make in a 401(k) plan are guaranteed by the FDIC so there is no risk of loss.

1 2 4

Mark whether each of these statements about stock indexes is true. Select all that apply. □ The Dow, S&P 500, and Nasdaq all measure the same stocks but in different quantities □ Unlike individual company stocks, which can fall in value, stock indexes always go up in value □ If the S&P 500 goes up 12 points, that means each of the 500 stocks must have gone up 12 points □ Stock brokers and individual investors can use the indexes to get a sense of how the market is performing □ All countries trade on the same stock markets and, therefore, use the same 3 stock indexes to assess performance

1 2 5

How does psychology factor into investing? Select all that apply. □ The "herd mentality" can lead investors to buy when share prices are high and to sell when share prices are low which is the opposite of an optimal strategy □ Investors are rational actors so psychology has little role when it comes to investing □ Short-term fluctuations in stock prices (volatility) can often spook investors to give up on investments when they should not □ Selling when stock prices are falling is usually a good strategy so psychology can be helpful when it comes to investing

1 3

Mark whether each is a potential advantage of utilizing a robo-advisor. Select all that apply. □ Investment fees are extremely low □ Though transactions are conducted online, each robo-advisor has a dedicated financial advisor behind the scenes, making the best decisions for you □ Robo-advisors reduce the human emotional element from investing by having the computer make asset allocation decisions based on your answers to risk profile questions □ Since robo-advisors create diversified investment portfolios through automation, they are able to offer their services to investors with much smaller accounts than a typical financial advisor □ Since robo-advisors use sophisticated computer modeling and typically make similar recommendations, they eliminate your need to educate yourself about investing

1 3 4

Which of the following are examples of U.S. stock market indices (plural of index)? Select all that apply. □ NASDAQ Composite □ Amazon stock □ S&P 500 □ Nike stock □ Dow Jones Industrial

1 3 5

Jamie invests $1,000 in a 5% coupon bond issued by Nike that has a term of 10 years. Which of the following statements about this bond are TRUE? Select all that apply. □ If the bond is held for the full term. Jamie would have received $500 in coupon payments ($50/year) plus a $1,000 principal payment at the end of the term □ IF the bond was sold before the end of the ten year term, she would be guaranteed to receive the $1,000 principal back plus any coupon payments □ It is likely that the coupon rate would be adjusted several times during the bond term □ If interest rates dropped significantly in the first year that Jamie weld the bond, the price of the bond would likely be higher than on the date she bought it.

1 4

Samantha sees information about a bond index fund with the following characteristics: Average coupon rate of 2.5% She plans to invest $1,000 which meets the minimum requirements Average credit quality of AA Primarily invests in U.S. Treasury Bonds Average duration (fancy word for term) of 4.5 years Expense ratio of .15% (average expense ratio for funds like this is 1.0%) Select all statements that apply: □ She should receive about $25 a year in income from this fund □ This appears to be quite a risky investment for Samantha □ Having a low expense ratio usually means that the fund is not as well managed as a fund with a high expense ratio □ Since this is a low-risk investment, there is no chance that her investment would drop under $1,000 □ Since this is an index fund, the fund seeks to buy the bonds in a standard bond index and is not trying to "beat the bond market."

1 5

Which of the following statements are true about the relationship between risk and return when it comes to investing? Select all that apply. □ An investor should expect a higher return when investing in stocks compared to the return from an FDIC-insured savings account □ Since stocks are generally riskier than bonds, investors should expect to receive LOWER returns from stocks □ Investing in riskier assets (e.g., start-up companies) will guarantee a higher return for investors □ Investors in bonds can expect to lose money since companies often go bankrupt □ When it comes to investing, risk and return have a direct relationship, in that the riskier an investment, the higher its expected return

1 5

Select each statement below, regarding inflation, that is accurate. Select all that apply. □ You want the inflation rate to be higher than the interest you're earning on your investments □ We already know what the inflation rate will be in the year 2020, and we can use this information to make wise investments □ It's better to buy an expensive item now on a credit card, because in the future, inflation will cause it to be more expensive □ Historically, US inflation has been roughly 30% □ If you invest your money, you don't need to worry about inflation

2

Which of the following statements about Initial Public Offerings are TRUE? Select all that apply. □ IPOs are less risky than a typical stock market investment (i.e. investing in McDonald's or Coca-Cola) since they are typically smaller companies □ An IPO occurs when a private company sells stock to the public for the first time □ When an IPO occurs, a company raises money from public investors that they use to grow their business □ IPOs are risky investments since the company going public often has a limited track record of performance □ One benefit of "going public (another term for an IPO)" is that a public company has less regulation than a private one

2 3 4

Mark whether each of the following statements is an ADVANTAGE of investing in passively managed index funds. Select all that apply. □ Allows you to pick and choose individual stocks for investment □ Typically have lower expense ratios (costs) because it doesn't require an active manager to make investment decisions □ Encourages frequent buying and selling of shares, keeping you in the loop on your investments □ Research has shown that they typically outperform actively managed investment funds □ Since indices (plural of index) are typically made up of stock in many companies they provide investors diversification which reduces risk compared to investing in an individual stock

2 4 5

Which of the following statements about stocks and bonds are TRUE? Select all that apply. □ Stocks are generally considered less risky investments than bonds □ IF a company goes bankrupt, bondholders come before stockholders in determining how the remaining assets of the company are divided □ Most individuals create portfolios consisting of all stocks or all bonds but rarely ever combine the two asset types □ Stock prices and bond prices change on a daily basis □ The annual income that comes from an investment in stock of a company is called a dividend while the annual income from a bond is called a coupon

2 4 5

Highlight the statements that are TRUE about retirement. Select all that apply. □ You can start receiving Social Security benefits whenever you decide to retire □ You should be able to retire early (before the age of 60) when you have assets (savings and/or investment accounts) of about $50,000 □ When you start investing for retirement in your 20's, you should invest mostly in stocks since they have higher returns over the long-run □ A majority of companies do NOT offer pension plans today, so YOU will be responsible for your quality of life in retirement by making sound investment decisions

3 4

What are the differences between investing and saving? Select all that apply □ You are guaranteed to lose money when you invest while putting your money in a savings account is risk-free □ If you invest in stocks you are guaranteed a 7-9% return while savings accounts have interest rates of about 1% □ Since investing in the stock market carries with it higher risk, it also has a higher expected return than stashing your money in a savings account □ The returns you gain from investing in the stock market vary year to year but over the long-term have averaged about 7-9% which is higher than one can expect to earn in a savings account □ If you are fearful about losing money you should always put your money in a savings account and never invest

3 4

You are comparing two bond mutual funds: Bond Fund A is made up of U.S. Treasury bonds and has earned 4% per year on average over the past five years. Bond Fund B is made up of "junk bonds" of U.S. corporations and has earned 9% per year on average over the past five years. Which of the statements below is TRUE? Select all that apply. □ Bond Fund B is clearly the better choice since it has had a higher overall return over the past five years □ Bond fund A would likely perform worse in a difficult economy since it has bonds of lower credit quality □ Bond Fund B has had a better return since its non-investment grade bonds are riskier than Bond Fund A and investors expect higher returns from higher-risk investments □ Bond Fund A would be a good choice for an investor looking for a low-risk way to earn a higher return than a typical savings account □ Given Bond Fund B's higher risk, you should expect that it will always have higher returns than Bond Fund A.

3 4

Select all of the statements that are true: □ Between cash, stocks, and bonds, bonds are typically considered the riskiest □ Putting money into a savings account with interest is the ideal way for a young adult to invest □ Between cash, stocks, and bonds, cash is typically considered the least risky □ There are investment options even riskier than stocks □ Historically, stocks have had far greater annual returns than cash, government bonds, and savings accounts.

3 4 5

Mark whether each statement regarding Social Security is accurate. Select all that apply. □ Most Americans will have enough money from Social Security to retire comfortably □ In order to be eligible for Social Security, you must have worked for 35 years □ In order to be eligible for Social Security, you must have worked at the SAME job for 10 years □ If you save for your own retirement in a 401(k) or IRA, you still have to pay Social Security taxes from your paycheck □ You'll receive more Social Security benefits if you wait until age 70 instead of collecting your benefits at age 65

4 5

Which statement(s) about stocks, mutual funds and index funds are TRUE? Select all that apply. □ All of these financial products are ways to invest in the stock market □ Actively managed mutual funds typically carry higher costs (expense ratios) than index funds which often lead to them underperforming the index funds □ Purchasing individual stocks is usually the best way to invest in the stock market since the cost to buy stocks is so low □ The past investment performance of a mutual fund or index fund is no guarantee of future results □ Since mutual funds and index funds hold hundreds of stocks, they usually provide diversification benefits to investors which make them less risky than holding individual stocks

4 5

Which of the following are common investment mistakes? Select all that apply. □ Monitoring investments on a day-to-day basis □ Buying a stock after it has performed well and selling a stock after it has dropped (buying high and selling low) □ Purchasing a stock based on a tip from a friend □ Selling your stocks that have gone up in price and holding onto your stocks that have lost money hoping that they will rebound □ Purchasing a diversified stock index fund and holding it for long periods of time

1 2 3 4

Phoenix buys stock in Penny's Pickles at $25 per share. He sells it a few years later at a price of $35 per share. What was Phoenix's overall return on investment? a. 0.4% b. 40% c. 28.6% d. 10%

b

True or False. A stockbroker is always required to act in a client's best interests and is held to a fiduciary standard. a. True b. False

b

True or False. With proper asset allocation, you should never experience a negative yearly rate of return on your investment. a. True b. False

b

True or False? The best stock broker option for a novice investor who wants to invest in an index fund is to hire a full service broker, who is an expert and can help make this important first decision. a. True b. False

b

True or False? When a company is formed, its owner(s) decide whether it will be privately held or publicly traded. The company remains in that category for the rest of its lifespan. a. True b. False

b

What conclusion can you reach by analyzing the portfolio allocation models presented in resource #7 in the lesson? a. The risk of losing money in the stock market increases the longer you are invested in the market which means you better be good at "timing the market" b. The longer you hold an investment in a diversified index fund, the lower the probability that you will lose money with that investment c. The returns in the stock market have a negative bias, in other words the stock market returns decline more frequently than they rise d. The more bonds that you hold in your portfolio, the higher your expected returns will be

b

What is THE question an investor should ask before investing in a Roth IRA or a Traditional IRA? a. Do I want to make a guaranteed return of 6% or 8%? b. Do I want to pay taxes now (Roth IRA) or later (Traditional IRA)? c. Do I want to pay taxes now (Traditional IRA) or later (Roth IRA)? d. What type of investments do I want to make?

b

What is the most money that an investor could lose if they buy 40 shares of ElectricCarCo for $25/share a. Loss of $25 b. Loss of $1,000 c. $0 d. Lose $1,500 e. Lose more than $1,500

b

What is the relationship between the credit quality of a bond and its coupon rate? a. There is no relationship between credit quality and the bond's coupon rate b. The higher the credit quality of a bond, the lower the coupon rate, all other things being equal c. The lower the credit quality of a bond, the lower the coupon rate, all other things being equal d. The higher the credit quality of a bond, the higher the coupon rate, all other things being equal

b

Which of these statements does NOT accurately describe Treasury bonds? a. They are the least risky bond investment you can make b. Investors are drawn to them because they typically pay a high coupon. c. You can purchase them without using a broker at all. d. They are available in smaller denominations than corporate bonds.

b

Which strategy is the best when it comes to investing for retirement for these 25 year olds? a. Bill worries about the risks in the stock market so his primary method of saving for retirement is to set aside $2,000 per year into a savings account. b. Juana invests $1,500 a year in her company's 401(k) plan and her company provides a $500 match every year. Her investment choice: the S&P500 index fund. c. Francis has a very tight budget and is committed to saving $2,000 a year in his company's 401(k) plan once he is 35 years old after he has a house and has paid off his student loans. d. Kamil's company has a 401(k) plan with a match program. He forgot to fill out the paperwork so just puts $1,500 a year in an IRA. His investment choice is the S&P500 index fund.

b

Your risk tolerance for investing should be determined by these two factors: a. Your stocks and bonds b. Your time horizon and when you will need access to the money c. Your debits and credits d. Your education level and ethnicity

b

Jarvis buys 50 shares of SneakerCo for $20/share. Over the next twelve months, he receives $0.50/share in dividends. He sells all of the SneakerCo stock after one year for $22/share. What is the return on his investment? a. 2.5% b. 5.0% c. 10.0% d. 12.5% e. 15.0%

d

Justin wants to go to spend a month traveling Europe next summer but doesn't have the money to do so. He;s thinking of investing the $700 he currently has saved in stock in his favorite restaurant in hopes of earning the money for the vacation. Why shouldn't he do that? a. Investing in one company's stock is quite risky. b. Investing your whole savings in the stock market is a bad financial move. c. One year probably isn't enough time for one stock to turn $700 into a month's vacation. d. All of the above.

d

Katrina works for Penny's Pickles, which offers a 401(k) match for up to 3% of her salary, which is $75,000 per year. In her budget, she only has $150 per month available to save for retirement. What should she do? a. Contribute her $150/mo to Social Security -- it's the best way to make sure she gets her money back b. Contribute $75/mo to her 401(k) and $75/mo to an IRA, so that she's diversified. c. Save up money in a bank account until she has enough to max out her 401(k), and then invest. d. Contribute the full $150/mo to the 401(k) because her company will match that full amount, "doubling" her investment every month.

d

Wanda bought a share in Tasty Ice Cream for $25 on March 1. On June 13, Tasty Ice Cream's shares were trading for $23.50. What happens if she sells her share on June 13? a. Wanda will make $1.50 by selling her share. b. Wanda will receive her full $25 purchase price back, but she won't make any profit. c. Wanda cannot sell her share on June 13; she must wait for the price to go above $25 in order to sell. d. Wanda will receive $23.50 for her share, meaning she lost $1.50 on the investment

d

When it comes to buying stock in a company like Nike or Netflix... a. You should listen to experts on TV stations such as CNBC since they are generally right when it comes to picking good investments b. It is generally easy for most investors to predict the direction of future stock prices c. You should sell the stock a soon as possible so that you can make a profit d. It is much more risky to invest in individual stocks (like Nike or Netflix) compared to investing in an index fund made up of a collection of stocks

d

Which of the following statements about stock brokers (aka financial advisors) is TRUE? a. Brokers are required by law to always act in the best interests of their clients for non-retirement accounts b. Since brokers spend all their time focused on the stock markets, they have a great track record of beating the market c. Since investing is so difficult, brokers are the best choice for novice investors who don't want to educate themselves about investing in the stock market d. With fees as high as 2%, most clients of financial advisors earn returns that are BELOW the return than if they just invested in a stock market index fund.

d

Which of these bond terms is most similar to the stock market concept of interest rate? a. default risk b. speculating c. par value d. coupon

d

Which of these is the MOST compelling reason for young adults to invest? a. When you're young, you have more disposable income available for investments. b. Young people are naturally better risk takers than older adults, so it's a great advantage in the stock market. c. Young people have fewer responsibilities, and therefore, more time to research to find the perfect stock to invest in. d. Young people have time on their side, so investments made in their 20s have decades to compound and grow in value.

d

Why is compound interest more advantageous than simple interest? a. It's more difficult to calculate, so fewer people use compound interest, making more profits for those who do. b. Compound interest accumulates very rapidly, so you only have to save for 3 years or fewer to earn far more money. c. Compound interest is attached to the stocks with the highest risk, so you get the highest interest on them. d. In compound interest, you earn interest on not only your principal, but also on the interest you've already made.

d

Which of these is NOT one of the job functions of a stock exchange floor trader? a. Assessing the buying and selling of stocks that's going on to look for opportunities for their clients. b. Calling customers on the phone to have conversations about strategy for the day. c. Reading current events and watching the news. d. Buying and selling stock on behalf of customers. e. Buying and selling stock in order to make money for their own companies.

e

You deposit $1,000 into a five year certificate of deposit (a type of savings account with a fixed rate of interest) earning 1% per year that compounds interest annually. After five years, the balance in your account will be... a. About $1000 b. More than $1000 but less than $1010 c. More than $1010 but less than $1030 d. Exactly $1050 e. More than $1050

e

Interest rates and bond prices are inversely related, which means that when interest rates, rise, bond prices will fall a. True b. False

a

Since stocks have better long-term returns than bonds, why don't all investors just invest all of their money in stocks? a. Investors have different tolerances for risk and may make bad decisions with a 100% stock portfolio, such as selling out when stock prices have had a significant drop. b. Most investors do have a 100% of their money in stocks since bonds are so unpopular c. Bonds typically do best when stocks do best so they make returns even better when they are combined d. Bonds are riskier than stocks so you want to own both

a

Which of the following is NOT an advantage of purchasing a bond fund instead of an individual bond? a. You get to choose all of the individual bonds you want to put into your fund. b. Your risk is diversified over multiple bonds, so if one does poorly, your entire fund isn't ruined c. Bond funds are more cost-effective because they don't require the constant buying and selling of individual bonds d. A bond professional has chosen the makeup of the funds, so you benefit from their knowledge.

a

Which type of retirement account is an investment option for ANY young person entering the full-time work force? a. Traditional IRA b. Pension c. 401(k) d. Trick question -- you can't invest in retirement until you've worked long enough to become vested

a

Your cousin just graduated from college and got her first full time job. Which of these probably represents the BEST piece of investment advice for her? a. She should start investing immediately in a passively managed index fund and add to her investments on a regular basis. b. She should set up an online brokerage account, choose her favorite company, and buy a small number of shares in that company. c. She should hire a stock broker to make the decisions for her. d. She should invest in bonds so that she has extra income to rely on.

a

I am a retirement plan sponsored by your employer (the company you work for). You have a limited set of investment choices that I will give to you. One facet of the program may be a match in which your company matches your contribution to the plan. Typically, the contributions that you make to the plan will lower your taxable income so there are tax benefits to me also. What am I? a. Individual Retirement Account (IRA) b. Roth Individual Retirement Account (Roth IRA) c. 401(k) Plan d. Mutual Fund e. Pension

c

Imagine that the interest rate on your savings account is 1 percent a year and inflation is 2 percent a year. After one year, would the money in the account buy more than it does today, exactly the same or less than today? a. More b. Exactly the same c. Less

c

Sam and Jessica have a contest to see who can earn more profit by investing $1,000 in the stock market. Sam buys 50 shares of SmartphoneCo for $20.share. Jessica buys 200 shares of Juice Co for $5/share. A year later, Sam sells his SmartPhoneCo stock for $22.share and Jessica sells her JuiceCo stock for $7.share. Whose figures below are correct when it comes to calculating their profits? a. Sam had a profit of $1100 and Jessica's profit was $1,4000 b. Sam and Jessica both had a total profit of $2 c. Jessica had a profit of $4000 and Sam had a profit of $100 d. Sam and Jessica both had a total profit of $1,000 e. Since SmartPhoneCo stock was sold at a higher price than JuiceCo, Sam had more profit than Jessica

c

What is the single most important decision that investors make (after their decision about how much to save)? a. Which stocks to buy b. Which savings account to put extra money in c. How to divide their assets between stocks and bonds d. Which investment advisor to select e. Which bonds to buy

c

Which of these statements about dividends is true? a. Dividends are automatically reinvested into the company's stock, earning you more money. b. Once you purchase the stock, the dividend remains constant as long as you own the stock c. It is possible to earn dividends on your investment, even if the value of the stock has decreased from when you first bought it. d. By law, all publicly traded companies must pay their shareholders dividends 4 times per year.

c

Which statement is TRUE regarding dollar cost averaging? a. Dollar cost averaging works best if you are picking and choosing different stocks to invest in each month b. Dollar cost averaging is most advantageous for investors who are getting close to retirement age c. Dollar cost averaging refers to the fact that you can buy more shares with the same size investment when share prices are low. d. Dollar cost averaging allows you to automatically sell your shares when the price is low. e. Dollar cost averaging is an investment strategy best suited for expert investors with a lot of experience.

c