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| 1 | |
Melissa Eldridge has determined that a reasonable estimate of the cost of sending her two children to college in the future (currently they are 2 and 4) is about $100,000 per child. She has also determined that a comfortable retirement for herself would be if she could continue to have income of approximately $40,000 per year after she retires. Which step in the investment process is Melissa completing? |
| | A) | Establishing investment goals |
| | B) | Determining the amount of money she will need to reach her goals. |
| | C) | Specify the amount of money she currently has available to fund her goals. |
| | D) | Listing different investments she wants to evaluate. |
| | E) | Evaluate the risk and return potential of all of the investments she is considering. |
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| 2 | |
Melissa Eldridge is planning on saving $4000 per year (at the end of the year) for the next 30 years that she works. If she can earn an interest rate of 8% per year how much will she have at the end of 30 years? (Round to the nearest $100) |
| | A) | $120,000 |
| | B) | $129,600 |
| | C) | $453,100 |
| | D) | $45,000 |
| | E) | None of the above |
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| 3 | |
Robert Clark has set some investment goals for himself, knows how much money he will need to achieve those goals and has evaluated how much money is available today to invest. Robert has listed five potential investments for consideration. These include a certificate of deposit, a mutual fund, corporate bonds, common stock and options. Which step of the financial planning process is Robert completing? |
| | A) | Listing different alternatives that he wants to evaluate. |
| | B) | Evaluating the different risk factors and the potential return of each alternative. |
| | C) | Reducing the possible investments to a reasonable number. |
| | D) | Choosing at least two different investment alternatives. |
| | E) | Continuing to evaluate his investment plan. |
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| 4 | |
Martin Shore is thinking about investing in corporate bonds. He is a little worried because this would be a long-term investment and thinks it is possible that the interest that he will earn in the future will not buy as much as it would today. What risk factor is Martin worried about? |
| | A) | Inflation risk |
| | B) | Interest rate risk |
| | C) | Business failure risk |
| | D) | Market risk |
| | E) | None of the above |
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| 5 | |
Monica Alvarez is thinking about investing in the stock market. However, she is worried because economic growth has slowed in recent months and consumer confidence has decreased. What risk factor is Monica worried about? |
| | A) | Global investment risk |
| | B) | Interest rate risk |
| | C) | Business failure risk |
| | D) | Market risk |
| | E) | None of the above |
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| 6 | |
Steve Patterson wants to start investing for his retirement which is still many years away. He wants to invest in securities that have the best chance of increasing in value before he retires. What factor is affecting his choice of investments the most? |
| | A) | Safety and risk |
| | B) | Investment income |
| | C) | Investment growth |
| | D) | Investment liquidity |
| | E) | None of the above. |
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| 7 | |
Jennifer Rizzi wants to invest in a low risk investment alternative. Which of the following would be the best investment for her? |
| | A) | Government Bond |
| | B) | Mutual Fund |
| | C) | Common Stock |
| | D) | Option Contract |
| | E) | All of the above |
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| 8 | |
Which of the following are the characteristics of real estate? |
| | A) | Low risk, low liquidity and average growth |
| | B) | High risk, low liquidity and high growth |
| | C) | Average risk, low liquidity and average growth |
| | D) | High risk, high liquidity and high growth |
| | E) | None of the above |
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| 9 | |
Katherine Kocher bought 100 shares of General Mills stock for $45 at the beginning of the year. During the year this stock paid a dividend of $1.00 per share. At the end of the year, she sold the stock for $52 per share. What is Katherine's rate of return on this stock? |
| | A) | 13.46% |
| | B) | 15.56% |
| | C) | 15.38% |
| | D) | 17.77% |
| | E) | None of the above |
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| 10 | |
A(n) _______________ is an investment alternative chosen by people who pool their money to buy stocks, bonds and other securities. Securities are selected by a professional manager employed by an investment company. |
| | A) | Mutual fund |
| | B) | Common stock |
| | C) | Corporate bond |
| | D) | Government bond |
| | E) | None of the above |
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