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Questions and Answers
What is the primary advantage of tax-sheltered retirement accounts?
What is the primary advantage of tax-sheltered retirement accounts?
Which method is commonly used to determine the cost basis of shares when calculating capital gains?
Which method is commonly used to determine the cost basis of shares when calculating capital gains?
Which of the following best describes consumer credit?
Which of the following best describes consumer credit?
What is the main difference between a traditional IRA and a Roth IRA?
What is the main difference between a traditional IRA and a Roth IRA?
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What does liquidity refer to in financial contexts?
What does liquidity refer to in financial contexts?
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What is one potential drawback of investing in mutual funds?
What is one potential drawback of investing in mutual funds?
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What is the primary purpose of a Money Market Deposit Account (MMDA)?
What is the primary purpose of a Money Market Deposit Account (MMDA)?
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Which of the following correctly defines an initial public offering (IPO)?
Which of the following correctly defines an initial public offering (IPO)?
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What is a major risk associated with investing in stocks?
What is a major risk associated with investing in stocks?
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How can you make money by investing in a company’s stock?
How can you make money by investing in a company’s stock?
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What does the price/earnings ratio (P/E) indicate?
What does the price/earnings ratio (P/E) indicate?
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What distinguishes actively managed funds from passively managed funds?
What distinguishes actively managed funds from passively managed funds?
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Which bond type is issued by the federal government to raise funds?
Which bond type is issued by the federal government to raise funds?
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Study Notes
Chapter 1: Making Sense
- Define ownership investments, including three major types, their pros and cons, and ways to achieve financial independence.
- Outline SMART financial goals and define lending investments, including their types and pros/cons.
- Understand the role of brokers and investment firms and how to choose the best ones.
Chapter 2: Retirement Accounts
- Differentiate between short-term and long-term financial goals, including the importance of a rainy-day fund.
- Define consumer credit and types of retirement accounts (acronyms).
- Understand the tax advantages and disadvantages of retirement accounts and how to avoid early withdrawal penalties.
- Compare Individual Retirement Accounts (IRAs) and Roth IRAs.
Chapter 3: Risk & Returns
- Explain the importance of risk and return and methods to reduce risk.
- Define inflation, purchasing power, the importance of liquidity, and ways to minimize risk.
- Define "rate of interest" and "yield," and compare real returns to average returns.
- Explain how compounding grows investment dollars.
Chapter 4: Minimize Taxes
- Define tax-sheltered retirement accounts.
- Understand capital gains vs. ordinary income tax.
- Explain federal marginal income tax rates and advantages of knowing the corporate tax rate.
Chapter 5: Money Mutual Funds
- Describe money market mutual funds, including their benefits and drawbacks.
- List common mutual fund holdings and ways to access money from these funds.
- Explain how to find good money mutual funds and the meaning of "municipal."
- Discuss alternatives to money mutual funds and Money Market Deposit Accounts (MMDAs).
- Explain the purpose of money mutual funds.
Chapter 6: Stocks
- Define stocks and provide examples.
- Describe stock offerings, benefits, and drawbacks.
- Explain initial public offerings (IPOs) and the implications of stock issuance.
- Define profit/earnings and how companies can increase profits.
- Discuss how to make money investing in company stocks.
Chapter 7: Bonds
- Define bonds, their benefits and drawbacks, and tax implications.
- Compare bonds to mutual funds and ETFs, and understand who issues bonds.
- Define "credit rating" and bond maturity classifications, as well as yield curves.
- Explain when bonds can be sold and their investment purpose.
- Discuss alternatives to bonds, such as GICs and private mortgages.
- Explain methods to minimize mistakes with individual bonds.
Chapter 8: Fund Investing (ETFs)
- Explain what ETFs are, how to invest in them, reasons to invest in them, and what an individual fund manager is.
- Explain how to keep fund costs low and what index funds are.
- Discuss the differences between actively and passively managed funds and what mutual index funds are.
Chapter 9: Investment Alternatives
- Define options, including their pros and cons.
- List different types of commodities, including metal ETFs and cryptocurrencies.
- Discuss the pros and cons of cryptocurrencies, collectibles, and annuities.
- Explain annuities, life insurance, cash-value coverage, and affiliated investment products.
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Description
This quiz covers foundational concepts in finance across three chapters. You'll explore ownership and lending investments, retirement accounts, and the principles of risk and returns. Test your understanding of financial goals, investment options, and the role of brokers.
