Week 3 Quiz - Investments (7pts) – ANSWER KEY 1. If you had $1,000 to invest into the following funds, which one would have the highest value (not including any fees) at the end of the second year? Green Fund with Year 1 return of -9.5% and Year 2 return of +10% Purple Fund with Year 1 return of +10% and Year 2 return of -9.5% Yellow Fund with Year 1 return of +30% and a year 2 return of -25% Orange Fund with Year 1 return of 0% & Year 2 return of 0% 2. If you had a fund with a Year 1 return of +30% and a year 2 return of -25%, what is this fund's a) average annual return for the two years and b) actual return for the two year period? a) +2.5% b) +2.5% a) +5% b) 0% a) +5% b) +2.5% a) +2.5% b) -2.5% 3. Which type of investment typically charges the investor the lowest fees? Mutual fund - actively managed Index fund - passively managed Bond fund - actively managed International funds 4. What is a dividend? The new company entity that results from a company merger Money a company regularly (typically quarterly) charges shareholders to help profits The interest from a corporate bond that a company pays the bond-holder Money a company regularly (typically quarterly) pays shareholders from its profits
5. Suppose you have been employed for about a year and a half and have been offered a better job at a different employer. Assuming you have been taking advantage of the matching 401k plan, what will happen to your 401k if you leave your current job before you are fully vested? You may lose some or all of your 401k match, but will get to keep your contributions You will always get to keep the entire balance of your 401k A judge will need to review the company charter to decide You will lose your entire 401k 6. What would happen to the buying power of your investment after one year if your rate of return was 8% and the rate of inflation was 3%? The buying power would increase by 5% The buying power would increase by 11% The buying power would decrease by 1% The buying power would increase by 8% 7. What is the intended purpose of a 401k account? Save money for emergencies Invest money for college Invest money for retirement Save money for vacation
Quiz Details Question
Answer Choices
Correct Answer Answer Explanation
Point Value
Orange Fund with Year 1 return of 0% & Year 2 return of 1. If you had $1,000 to 0%, Purple Fund with Year 1 Orange Fund invest into the following return of +10% and Year 2 with Year 1 funds, which one would return of -9.5%, Green Fund return of 0% & have the highest value (not with Year 1 return of -9.5% Year 2 return of including any fees) at the and Year 2 return of +10%, 0% end of the second year? Yellow Fund with Year 1 return of +30% and a year 2 return of -25%
Orange Fund with Year 1 return of 0% & Year 2 return of 4.00 0%: All other choices lose money.
2. If you had a fund with a Year 1 return of +30% and a year 2 return of -25%, a) +2.5% b) -2.5%, a) +2.5% what is this fund's a) a) +2.5% b) b) +2.5%, a) +5% b) +2.5%, a) average annual return for 2.5% +5% b) 0% the two years and b) actual return for the two year period?
a) +2.5% b) -2.5%: Average annual return for the two years is ((.30+(.25))/2 = +2.5% The 4.00 actual return for the two year period is ((1+.30)*(1-.25)-1)= 2.5%
3. Which type of investment typically charges the investor the lowest fees?
Mutual fund - actively managed, Index fund Index fund passively managed, Bond fund passively - actively managed, managed International funds
Index fund passively managed
4. What is a dividend?
Money a company regularly (typically quarterly) charges shareholders to help profits, Money a company regularly (typically quarterly) pays shareholders from its profits, The interest from a corporate bond that a company pays the bond-holder, The new company entity that results from a company merger
Money a company regularly (typically quarterly) pays 4.00 shareholders from its profits
Money a company regularly (typically quarterly) pays shareholders from its profits
5. Suppose you have been You will lose your entire 401k, employed for about a year You may lose some or all of You may lose and a half and have been your 401k match, but will get some or all of offered a better job at a to keep your contributions, your 401k different employer. You will always get to keep the match, but will Assuming you have been entire balance of your 401k, A get to keep your taking advantage of the judge will need to review the contributions matching 401k plan, what company charter to decide
4.00
You may lose some or all of your 401k match, but will get to 4.00 keep your contributions
will happen to your 401k if you leave your current job before you are fully vested? 6. What would happen to The buying power would the buying power of your increase by 8%, The buying The buying The buying power investment after one year power would increase by 11%, power would would increase by if your rate of return was The buying power would increase by 5% 5% 8% and the rate of inflation increase by 5%, The buying was 3%? power would decrease by 1% 7. What is the intended purpose of a 401k account?
Save money for emergencies, Invest money for college, Invest money for Invest money for Invest money for retirement, retirement retirement Save money for vacation
4.00
4.00
If you had $1,000 to invest into the following funds, which one would have the highest value (not including any fees) at the end of the second year? Green = -.45 Purple = -.45 Yellow = -2.5 Orange = 0
If you had a fund with a Year 1 return of +30% and a year 2 return of -25%, what is this fund's a) average annual return for the two years and b) actual return for the two year period? Average annual return for the two years is ((.30+(-.25)) / 2 = 2.5% The actual return for the two year period is ((1+.30)*(1-.25) -1 ) = -2.5%
Which type of investment typically charges the investor the lowest fees? Index fund - passively managed
* You are on your own for questions 4, 5, 6, and 7 but you can open other tabs if it would help to research. Some of them are common sense. Do as well as you can.
