Consumer- Chapter 8 Flashcards

1
Q

long-term investments properly diversified include the following mutual funds…

A

growth, growth and income, international, excessive growth

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2
Q

Which of the following is a good investment option?

A

mutual funds

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3
Q

Which statement is true about liquidity?

A

both a and b

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4
Q

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

A

enable their money to make money

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5
Q

Company X’s 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)…

A

dividend

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6
Q

The benefits of diversification in your investment is…

A

reduce risk

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7
Q

To ensure that some of your retirement savings will not be subject to income tax among withdrawal you will contribute to a what?

A

Roth IRA

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8
Q

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

A

mutual funds

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9
Q

In some cases, employers will match employee contributions but you should fund your plan whether your company matches or not, this refers to…

A

401K

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10
Q

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

A

403B

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11
Q

When buying and selling investments you should not…

A

switch your investment strategy often based on market conditions

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12
Q

Employee benefits packages should…

A

non-wage compensation provided to employees along with their regular wages

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13
Q

A savings account sold by an insurance company designed to provide payments to the holder in specific intervals to save money usually after retirement…

A

annuity

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14
Q

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

A

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

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15
Q

T or F: Money markets are great for emergency funds due to their liquidity and stability

A

true

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16
Q

T or F: The purpose of war bonds is to finance army options during war times. The last time the U.S. issued war bonds was during the Vietnam War.

A

false

17
Q

T or F: A mutual fund portfolio that is properly diversified will have all investment dollars located in just one of four different classes of financial assets

A

false

18
Q

T or F: Single stocks and mutual funds carry the same amount of risk

A

false

19
Q

T or F: You can start investing with a small amount of money

A

true

20
Q

T or F: A good investment portfolio is extremely complex

A

false

21
Q

T or F: You should start investing as soon as you have your college education funded

A

true

22
Q

T or F: If you leave a job and have money saved in your employer’s retirement plan you always roll that money into an IRA using a direct rollover then you avoid taxes and penalties

A

true

23
Q

T or F: If you get into financial trouble, borrowing against your retirement plan is a good option

A

false

24
Q

T or F: Savings and investing have nothing to do with the amount of money you make

A

true

25
Q

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

A

liquidity

26
Q

Relationship of substantial reward compared to the amount of risk taken

A

risk return ratio

27
Q

a list of your investments

A

a portfolio

28
Q

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

A

a share

29
Q

securities that represent part ownership or equity in a corporation

A

stocks

30
Q

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

A

tax favored dollars

31
Q

the government agency responsible for regulating the stock market

A

securities exchange commission

32
Q

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

A

the IRS

33
Q

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

A

dividend

34
Q

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

A

A 5-29 plan

35
Q

Explain why you should never invest using borrowed money.

A

because it increases the risk of investment and if you lose the money, you are still left with payments

36
Q

Explain the risk-return ratio

A

used by investors to compare the expected returns of an investment to the amount of risk they take to get the returns

37
Q

Why do single stocks carry a high degree of risk? Why do mutual funds carry less risk?

A
  • Single stocks carry a high degree of risk because there is no diversification in investment.
  • Investing in mutual funds ensures diversification and lowers risk
38
Q

What is the Rule of 72? How is it calculated?

A

a quick way to calculate the length of time it will take to double a sum of money; calculated by dividing 72 by the expected interest rate to determine the number of years it will take to double your sum of money

39
Q

Is real estate a liquid investment? Explain your answer.

A

No, not a liquid investment; takes time and consideration of the current market to sell real estate, making it difficult to access your investment dollars