ch C

Question 1

6 steps to controlling assets

Answer 1

1. Take inventory
2. keep track of expenses
3. prepare a budget
4. pay of debts
5. start a savings plan
6. borrow only to buy assets

Question 2

Interest on mortgage is ____

Answer 2

tax deductible

Question 3

contratian approach

Answer 3

buying stock when everyone is selling

Question 4

criteria for the right investment

Answer 4

risk, yield, duration, liquidity, tax consequences

Question 5

reducing risk via diversification, meaning….

Answer 5

buying difference types of investments

Question 6

What are robo advisors?

Answer 6

automated online tools that use advanced algorithms to make suggestions, manages and re balance portfolios

Question 7

If a company reaches business objectives then increases _____

Answer 7

potential for capital gain (positive difference between the price at which you buy and then sell)

Question 8

blue chip stocks

Answer 8

regular dividends and price appreciation

Question 9

growth stocks

Answer 9

earnings growing at a faster rate

Question 10

income stocks

Answer 10

high dividend yield that pace w/ inflation

Question 11

penny stocks

Answer 11

ownership in companies with high risk industries

Question 12

market order

Answer 12

broker to buy / sell a stock immediatly

Question 13

limit order

Answer 13

tells broker to buy/ sell at a specific price

Question 14

bonds sold at a discount

Answer 14

price is less than face value

Question 15

bonds sold at premium

Answer 15

has value, price above face value

Question 16

advantages of bonds

Answer 16

guaranteed income and limited risk

Question 17

When interest rates rise the bonds ___-

Answer 17

fall

Question 18

mutual funds

Answer 18

investment company pools money to buy stocks/bonds and investments

Question 19

load fund (mutual fund)

Answer 19

charges investors a commission to buy/sell shares

Question 20

no load fund (mutual fund)

Answer 20

no commission

Question 21

open end fund (mutual fund)

Answer 21

will accept investments of any interested investors

Question 22

closed end funds (mutual funds)

Answer 22

limit # of shares, once fund reaches target #, no new investors can buy into fund

Question 23

ETF

Answer 23

mix of stocks and mutual funds

traded on securities exchanges, like stocks

Question 24

term insurance

Answer 24

simple least expensive pure insurance protection for a couple of months

Question 25

whole life insurance

Answer 25

combines pure savings and insurance. how much payment towards invesments

Question 26

variable life insurance

Answer 26

type of whole life insurance that invests cash value of policy in stocks and other high yield securities

Question 27

insurance companies sell annuities that are contracts

Answer 27

to make regular payments to a person for life/ fixed period

Question 28

fixed annuities

Answer 28

investments that pay at a specified interest rate

Question 29

variable annuities

Answer 29

provide investment choices identical to mutual fund

Question 30

Patient protection and Affordable Care Act

Answer 30

initially required nonexempt individuals to maintain a min level of ins or tax penalty until 2017

Question 31

HSA (health savings account)

Answer 31

tax deffered

Question 32

disability insurance

Answer 32

ins that pays part of cost of a long term sickness or accident

Question 33

Homeowners/ renters insurance

Answer 33

guaranteed replacement cost | covers depreciated cost

Question 34

Social Security -1935

Answer 34

fund of money, continuous flow of contribution and payments

Question 35

maintaining social security requires

Answer 35

reducing benefits/ late retirements/ limiting cost of living adjustments and increasing taxes

Question 36

IRA

Answer 36

tax deffered investment plan that enables you to save part of income for retirement

Question 37

traditional IRA

Answer 37

allows people who qualify to deduct from their reported income the money they put in their account

Question 38

tax deferred contributions

Answer 38

no current taxes but earnings gained in IRA are taxed as income when they are withdrawn

Question 39

ROTH IRA

Answer 39

no upfront deductions, earnings grow tax free

Question 40

for self employed.... SEP Ira

Answer 40

anuual contribution limit: 56000$

Question 41

simple IRA

Answer 41

for companies with less than a 100 employess

Question 42

401K plan

Answer 42

employee sponsored savings plan that allows you to deposit a set amount of pre tax and collect compounded earnings tax free free until withdrawl

Question 43

benefits of 401K

Answer 43

1. contributions reduce present tax income 2. Tax is offered on earnings 3. employers will match contributions