Investiment Unit

Question 1

Dividends

Answer 1

Portion on a corporations earnings paid in stockholder

Question 2

Credit union

Answer 2

Nonprofit financial cooperative owned by/operated for the benefit if it’s members.

Question 3

Cashiers check

Answer 3

Special type of check that the bank guarantees to pay.

Question 4

Certified check

Answer 4

Personal check that a bank certifies is genuine and that there is enough money in the account to cover the check.

Question 5

Dow jones industrial average

DJIA

Answer 5

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded in the New York Stock Exchange and the NASDAQ.

Question 6

Diversification

Answer 6

Spreading risk by putting money in a variety if investments.

Question 7

Electronic funds transfer (EFT)

Answer 7

Movement of money electronically from one financial institution to another.

Question 8

Mutual fund

Answer 8

Investment created by pooling the money of many people and investments in a collection of several securities.

Question 9

Prospectus

Answer 9

Legal document that gives a detailed description of a security.

Question 10

Roth IRA

Answer 10

Individual retirement account in which individuals contribute after-tax income and qualified withdrawals are not taxed.

Question 11

Rule of 72

Answer 11

Equation that estimates how long it will take to double an investment with a fixed interest rate.

Question 12

What’s something you should think about when your considering the best investment plan for you?

Answer 12

Tax advantages
Past history on rate of return
Liquidity

Question 13

What can you do electronically on an ETF?

Answer 13

Deposit a check
Withdraw money
Wire money to another account

Question 14

When you invest in a bond…

Answer 14

You earn a fixed amount of interest and the company/gov. is actually borrowing money from you

Question 15

Certification of a deposit state

Answer 15

You deposit a certain rate for a certain time

Question 16

Mutual funds are good because…?

Answer 16

They are managed by a professional, you are naturally diversified, and you can start with a modest amount of money

Question 17

List Liquid investment characteristics

Answer 17

Easy to get your investment back, usually low risk, and appeal to the investor who does not have a lot of money.

Question 18

List 2 stock exchanges

Answer 18

NYSE and Nasdaq

Question 19

Roth IRA characteristics

Answer 19

You can withdraw tax free at the age of 59 and a 1/2, you use the after tax money to invest, they are tied to stock market performance, and they are usually a great choice for young investors

Question 20

Difference between DOW and the Nasdaq composite is that…?

Answer 20

The Dow tracks 30 blue chips stocks while the Nasdaq comp tracks electronically traded tech stocks

Question 21

When you diversify, you…?

Answer 21

Invest in a variety of different stocks in different industries, could be investing in a mutual fund, or could have CD’s, IRA’s, stocks, bonds and savings

Question 22

The most liquid investment is…?

Answer 22

A checking account

Question 23

The SEC…?

Answer 23

Keeps companies honest about info to their investors, regulated insider trade, and is a federal agency

Question 24

Rule 72 characteristics

Answer 24

Requires the interest rate of your investment, shows that a higher interest rate will result in a lower number of years to increase your money, and is a simply an estimate (as guaranteed rates are often not possible)

Question 25

A commercial bank...?

Answer 25

Has investors Is usually backed by the FDIC in the amount of 250,000 per account An example would be chase

Question 26

Index examples

Answer 26

DJIA (Dow Jones) S and P 500 Nasdaq composite

Question 27

IRA characteristics

Answer 27

Not company based Cannot withdrawal before age 59 and a 1/2 without penalties Have tax advantages You can choose the types of funds

Question 28

When you invest in a 401k you...?

Answer 28

Utilize a vendor provided be the company you work for, your employer may match all or a portion of what you invest, you be taxed if you withdraw before age 59 1/2, you can invest up to 17,500 tax fee

Question 29

Dollar cost average will...?

Answer 29

Even out the purchase prices of stocks over time, if you invest at regular intervals

Question 30

A voided check means that...?

Answer 30

The check had been rendered without value by the payor

Question 31

What's important about these three terms? Bounced check, insufficient funds, and overdrawn account

Answer 31

They mean the same thing

Question 32

The best way to make sure your account is balanced?

Answer 32

Reconcile your account

Question 33

Whats the Tradition pension plan? Why is it no longer offered?

Answer 33

A defined amount of money provided every month during retirement They're too expensive to provide anymore

Question 34

401k plan

Answer 34

Employe contributes money to an account with an employer, usually matching up to a certain amount/percent

Question 35

What does it mean that money put into the 401k is a pre-tax contribution?

Answer 35

The money goes into the account before you pay any tax from your paycheck

Question 36

Difference between Traditional/Roth IRA

Answer 36

Traditional-money goes in pre-tax Roth-the money goes after tax

Question 37

10% penalty if you withdraw money early from...?

Answer 37

An IRA

Question 38

What percent of your paycheck is deducted for social security?

Answer 38

6.2%

Question 39

Who benefits from social security?

Answer 39

People who are disabled, retired, surviving family member of deceased worker

Question 40

At what age can a person start collecting social security benefits?

Answer 40

62, only receive 75% of what the bank entitles you

Question 41

What age can a person start collecting dull social security benefits?

Answer 41

66

Question 42

IRA account that uses after tax dollars, no income tax

Answer 42

Roth IRA

Question 43

IRA that uses pretax and will result in income

Answer 43

Traditional

Question 44

Company pension plan characteristics

Answer 44

Both employer and employe contribute money, provisions provide a benefit each month for a retired person for as long as they live, and few companies provide pension to employe's because they're expensive

Question 45

Difference between investing and saving?

Answer 45

Investing: achieving part ownership of a company, risk loosing money Saving: giving bank money, they give some back

Question 46

Blue chip stalks

Answer 46

A stalk of a large, well established and financially sound company that's been opened for years

Question 47

Common stock

Answer 47

Stock that has voting rights and receives dividends declared by the company.

Question 48

Traditional IRA (or just IRA)

Answer 48

Traditional IRA contributions are tax-deductible on both state and federal tax returns for the year you make the contribution; withdrawals in retirement are taxed at ordinary income tax rates