Chapter 8 Pretest

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

A. International, bond, aggressive growth, growth

B. Growth, balanced, international, bond

C. Growth, growth and income, international, aggressive growth

D. Growth, growth and income, bond, aggressive growth

Which of the following is a good investment option?

A. Gold

B. Mutual funds

C. Viaticals

D. Futures

Which statement is true about liquidity?

A. The more liquid an investment, the more return

B. The less liquid the investment, the less return

C. The more liquid an investment, the less return

D. Both A and B

D. Increase the money supply

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

A. Have an opportunity to talk with financial service providers

B. Enable their money to make money

C. Be able to get anything they want

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):

A. Investment

B. Yield

C. Dividend

D. Buy-out

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

A. Earning a high rate of return

B. Emergency funds and short-term goals

C. Savings accounts and money-market accounts should be avoided since they carry high risk

D. Long-term investments like retirement

The benefit of diversification in your investments is:

A. Increased risk

B. Reduced risk

C. Reduced tax liability

D. Increased return

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

A. A Roth IRA

B. An annuity

C. A traditional IRA

D. A 401(k)

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

A. Real estate

B. Mutual funds

C. Single stocks

D. Bonds

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:

A. Roth IRA

B. Single stocks

C. Bond funds

D. 401(k)

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

A. 401(k)

B. 403(b)

C. 457

D. GIC

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

A. The Dow Jones Industrial Average is one measure of the stock market.

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

C. The stock market is a generic term that encompasses the trading of securities.

D. The terms bull market and bear market describe upward and downward market trends.

When buying and selling investments, you should not:

A. Learn the different types of investments

B. Set your investment goals and consider a time frame

C. Switch your investment strategy often, based on market conditions

D. Understand basic investment strategies and identify ones that will help you reach your goals

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

A. Annuity

B. Single stock

C. Money market

D. Mutual fund

Money markets are great for your emergency fund due to their liquidity and stability.

True

False

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.

True

False

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

True

False

You should start investing as soon as you have your college education funded.

True

False

If you leave a job and have money saved in your employerʹs retirement plan, always roll that money into an IRA using a direct rollover, which allows you to avoid taxes and penalties.

True

False

If you get into financial trouble, borrowing against your retirement plan is a good option.

True

False

Saving and investing have nothing to do with the amount of money you make.

True

False

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