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Copy of Unit 3 Investing Review (5/21/2025)

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_______ is a term used to describe how quickly your money can be converted into cash.
Illiquid
Liquidity
Equity
Collateral
Victoria has created an emergency fund. What is the purpose of her emergency fund?
It is for her to spend as she desires.
It is for her to use for retirement.
It is for her to use to pay for unexpected expenses.
It is for her to use for vacations.
It takes Hunter 9 years to double his $1000 investment at an 8% interest rate. What method did he use to figure this out?
compound interest formula
simple interest formula
future value formula
rule of 72 formula
Alexa started a job at Scheels and was offered a retirement plan. What is the name of the retirement plan offered by her employer?
IRA Plan
403(b) Plan
401(K) Plan
529 Plan
Lula has invested in a 401(k) plan in which she is able accumulate wealth by allowing her money to grow and not pay taxes until withdrawals are made when she retires. This method is known as?
tax as you go
tax exempt
penalty tax
tax deferred
Nick and Kia both invested in their company's 401(k) plan. What statement is true about Nick and Kia investment decision?
Nick and Kia will not have to pay taxes on the employer's contribution.
Nick invested earlier than Kia, but they still will have the same amount of money in their investment
The sooner Nick and Kia start investing, the larger their retirement account will be.
The employer's match will not make a difference on Nick and Kia's investment,
What is the term called to spread your assets out over several different investments to reduce the overall risk?
Liquidity
Speculation
Illiquid
Diversification
What professional could you hire if you would like to purchase stock on the stock market through a brokerage firm?
attorney
stockbroker
bank teller
personal banker
A ________ exists when stock prices are consistently rising.
bull market
trough market
recession market
Economic decline can be a good time to buy stocks that you think are sound investments. (buy low sell high concept). What market should you buy low in?
bear market
bull market
trough market
recession market
What is the benefit of tax-exempt investment options?
It allows you to earn income tax free.
It allows you to pay less taxes.
It allows you to earn money that will be taxed later.
It allows you to pay fees on your investments.
Short-term goal for a high school student may involve
Passing personal finance class
Buying a house
Retirement planning
Estate Planning
During retirement, it is likely that
costs related to working will be eliminated
some costs such as groceries and utilities will stay about the same
the costs of medical care and prescriptions will increase significantly
All of these will occur
An investment portfolio should
have a strong foundation of safe investments and be diversified
concentrate on a single industry
exclude any high-risk investments
none of these
A period of economic decline or recession
is never a good time to buy stocks
offers an opportunity to buy sound stocks at a lower price
will give rise to the bull market
is the time to sell all stocks
Owning a stock in the lumber mill during a decline in home construction is an example of
inflation risk
industry risk
political risk
stock risk
When the return on your investment is not keeping pace with the rapidly increasing prices in the general economy, this is a case of
inflation risk
industry risk
political risk
stock risk
Which of the following is most likely to be a medium-term goal for a high school senior student about to graduate?
passing personal finance class
planning to pay for college
paying off a mortgage
planning for retirement
Caleb has a IRA (individual retirement account) that is tax-deferred. What does it mean to be “tax-deferred”?
It means that he doesn’t have to pay taxes on his gains until he withdraws it.
It means that he doesn’t have to pay taxes on the interest earned.
It means that he gets a money match from his employer.
It means that he his investment has grown.
Violet wants to make some investments for the future. She has made a list of potential investments. She is looking for some investments that would be low risk. Which of the following investments on her list would NOT be low risk?
stocks
treasury bills
U.S. savings bonds
money market account
Ben has just secured his first job, and has the opportunity to invest in several different types of investments. He has chosen to “spread his assets out over several different investments” to reduce his risk of loss. What concept has he applied?
He has applied inflation risk.
He has applied diversification.
He has applied dollar-cost averaging.
He has applied contingencies.
Wyatt owns stock in a telecommunications company. He has received a distribution of a portion of the company’s profits. What has he received?
A bond
A portfolio
A mutual fund
A dividend
Todd has an investment portfolio. He has closely examined each of his investments and calculated his return on investment (ROI) What does the ROI tell him about his investments?
It tells the investor how much they will have to pay in taxes.
It tells the investor how much their investment as increased.
It tells the investor how much money the owe.
It tells the investor how much money they need to spend.
Tina has a mutual fund. She has discovered that the rate of inflation is higher than her rate of return on the mutual fund. What investment risk is she experiencing?
Stock Risk
Industry Risk
Political Risk
Inflation Risk
Arthur has implemented the “pay yourself first” strategy as part of his budget planning. What is Arthur doing?
He is spending his money frivolously.
He is setting money aside for savings before he pays his bills.
He is saving as little money as possible.
He is charging as much as possible on his credit cards.
Joleen has an investment portfolio. What is the purpose of her investments?
The purpose is to create deferred spending.
The purpose is to accumulate assets over her lifetime.
The purpose is to prepare for unplanned events.
The purpose is to make her money grow.
The Randalls are planning to retire. They have outline what they believe will be their expenses during retirement. Which of the following is least likely to be an expense for the Randalls?
medical care
groceries
utilities
mortgage
Avery has created a plan for saving and investing in hopes of being able to meet current and future needs and live comfortably. What is Avery seeking?
He is seeking retirement planning.
He is seeking estate planning.
He is seeking financial security.
He is seeking diversification.
Alice has an investment that allows her to have diversified holdings with the one investment. What type of investment does she have?
She has a growth stock.
She has a speculative investment.
She has a mutual fund.
She has a conservative investment.
Gerald likes to invest in the stock market. His current investments in the stock market have not been performing very well, but he has been able to pick up many stocks for cheap prices. What type of market condition is he experiencing?
bear market
financial market
bull market
economic market
Trey has several tax-exempt investments. What is the benefit of those tax-exempt investments?
It allows him to pay more taxes.
It allows him earn money that will be taxed later.
It allows him to earn income tax free.
It allows him to pay fees on his investments.
Bella would like to invest in an investment that would yield high earnings. She is not afraid to take risks. Which investment would allow her to earn lots of money, but carry a high risk?
certificate of deposits
savings accounts and low-yield bonds
mutual fund
investing in the stock market
Jane has an investment portfolio. She wants to ensure that it will continue to grow for her retirement. Which of the characteristics should she be sure that her portfolio meets?
It should have a strong foundation of safe investments.
It should include high-risk investments all together.
It should concentrate on a single industry.
It should be based on her favorite stocks.
Lucy has been dabbling in the stock market since she graduated from college. She hasn’t always had the best returns on her stocks, but lately things have been very profitable and she has made large profits on her stock ventures. What type of financial market is she experiencing?
bear market
financial market
bull market
economic market
An estate is all the things that a person owns, less debts owed at the time of that person’s death. Which of the following would be considered and asset?
investments
funeral expenses
mortgage
income taxes
Jorge is a junior in high school. His baseball team has been recognized as the best in the state, which has earned the team a chance to take a trip to visit the Minnesota Twins, and attend some training clinics with the Twins. He will need $2,000 for the trip. His parents are offering to pay for half of the trip, and the school will contribute $500 for the cost of the trip. Jorge will need to come up with the remaining $500. Which of the following assets would be the most liquid?
His baseball card collection
His Certificate of Deposit (CD)
His U.S. Savings Bond
His Savings Account
Ella has an IRA (Individual Retirement Account). What is the purpose of an IRA?
It is an account that allows for her money to be pooled together for purchases.
It is an account that allows for her money to be saved for travel.
It is an account that allows for her money to be pledged for CDs (Certificate of Deposit).
It is an account that allows for her money to be saved and used in retirement.
Brian is a nurse. He works for a nonprofit hospital. As an employee of the hospital, he can contribute to an employer sponsored retirement plan. Which retirement plan would his company be using?
401(k) Plan
403 (b) Plan
Roth IRA Plan
Keogh Plan
Miska is interested in investing in several stocks. He has downloaded a copy of the annual report from each of the company's websites. What is an annual report?
It is a company's report on its sales returns.
It is a company's report about the company's financial condition to shareholders.
It si a company's report on its insurance payments.
It is a company's report on the theft of its products.
Cassi has hired a stockbroker to help her make selections for her investment portfolio. What is a stockbroker?
An advisor who helps people make investment decisions based on goals.
A broker who sells and buys securities for a reduced commission.
A licensed professional who buys and sells securities on behalf of others.
A qualified broker who provides advice about what to buy and sell.
Evan and Kira file their taxes every year. Which agency has the responsibility of collecting their taxes?
The Internal revenue Service (IRS)
The department of Treasury
The Securities and Exchange Commission (SEC)
The Federal Trade Commission (FTC)
Kade has invested in several stocks in his investment portfolio. If Kade has questions about his investments or feels that something is not being handled correctly, which agency could he contact?
The National Credit Unit Administration (NCUA)
The Internal Revenue Service (IRS)
The Federal Reserve System (FRS)
The Securities and Exchange Commission (SEC)
The liquidity of an investment can affect the interest that you earn, but it is that liquidity of the investment that makes some investments the most useful. What qualifies an investment to be liquid?
It must be easily converted to cash
It must have a high rate of return
It must be a long-term investment
It must have a very low risk
Steven uses a strategy in which he invests the same amount of money on a regular basis, in his case monthly, regardless of market conditions or stock performance. Which investment strategy is Steven using?
investment tracking
dollar-cost averaging
market timing
systematic investing
Which agency has the responsibility of providing the nation with a safe and flexible financial system? (Determines rates)
The Internal Revenue Service (IRS)
The Securities and Exchange Commission (SEC)
The Federal Reserve System