chapter 8

Question 1

Piece of ownership in a company, mutual fund or other investment

Answer 1

share

Question 2

A retirement plan found in nonprofit organizations such as churches, hospitals and schools.

Answer 2

403(b)

Question 3

To ensure that some of your retirement savings will not be subject to income tax upon withdrawal, you would contribute to:

Answer 3

a roth IRA

Question 4

Employee benefits packages:

Answer 4

Are non-wage compensations provided to employees in addition to their normal wages or salaries

Question 5

Savings accounts and money-market accounts are most appropriate for:

Answer 5

Emergency funds and short-term goals

Question 6

Company Xʹs board of directors has decided to issue a portion of its earnings to its shareholders. If you own stock in Company X, you can expect to receive a(n)

Answer 6

dividend

Question 7

The benefit of diversification in your investments is

Answer 7

reduced risk

Question 8

Long-term investments, properly diversified, include the following mutual funds:

Answer 8

Growth, growth and income, international, aggressive growth

Question 9

Quality of an asset that permits it to be converted quickly into cash without loss of value; availability of money

Answer 9

liquidity

Question 10

Single stocks and mutual funds carry the same amount of risk.(t/f)

Answer 10

false

Question 11

Federal agency responsible for collecting taxes and for the interpretation and enforcement of the Internal Revenue Code

Answer 11

internal revenue service

Question 12

Securities that represent part ownership or equity in a corporation

Answer 12

stocks

Question 13

A savings account sold by an insurance company, designed to provide payments to the holder at specified intervals, usually after retirement

Answer 13

annuity

Question 14

A young investor willing to take moderate risk for above-average growth would be most interested in:

Answer 14

mutual funds

Question 15

A list of your investments

Answer 15

portfolio

Question 16

A savings plan operated by a state or educational institution designed to help families set aside funds for future college costs

Answer 16

529 plan

Question 17

A reason that people need to save and invest is to:

Answer 17

Enable their money to make money

Question 18

Which of the following is a good investment option?

Answer 18

mutual funds

Question 19

You can start investing with a small amount of money.(t/f)

Answer 19

true

Question 20

In some cases, employers will match the employee contribution, but you should fund your plan whether your company matches or not. This statement refers to:

Answer 20

401(k)

Question 21

You should start investing as soon as you have your college education funded.(t/f)

Answer 21

true

Question 22

The purpose of war bonds is to finance military operations during war time. The last time the United States issued war bonds was during the Vietnam War(t/f)

Answer 22

false

Question 23

Money markets are great for your emergency fund due to their liquidity and stability.(t/f)

Answer 23

true

Question 24

The government agency responsible for regulating the stock market

Answer 24

Securities Exchange Commission

Question 25

When buying and selling investments, you should not

Answer 25

Switch your investment strategy often, based on market conditions

Question 26

If you leave a job and have money saved in your employer’s retirement plan, always roll that money into an IRA using a direct rollover, which allows you to avoid taxes and penalties(t/f)

Answer 26

true

Question 27

Relationship of substantial reward compared to the amount of risk taken

Answer 27

risk-return ratio

Question 28

Good investment portfolios are extremely complex.(t/f)

Answer 28

false

Question 29

Saving and investing have nothing to do with the amount of money you make.(t/f)

Answer 29

true

Question 30

Which of the following statements about the stock market is false?

Answer 30

Formed in 1792, the New York Stock Exchange (NYSE) is the smallest organized stock exchange in the United States.

Question 31

A mutual fund portfolio that is properly diversified will have all investment dollars located in just one of four different classes of financial assets(t/f)

Answer 31

false

Question 32

If you get into financial trouble, borrowing against your retirement plan is a good option.(t/f)

Answer 32

false

Question 33

Money that is invested, either tax deferred or tax free, within a retirement plan

Answer 33

tax favored dollars

Question 34

Distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders

Answer 34

dividend

Question 35

Which statement is false about liquidity

Answer 35

• The more liquid an investment, the more return

- The less liquid the investment, the less return