Personal Finance 101 Exam 3 Ball State University

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Which of the following is a federal loan program that offers the best interest rates of all the federal loan programs?
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Perkins Loans
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Which of the following is not correct about investment planning and management?
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Asset allocation is the process of allotting your portfolio among four major asset classes: stocks, credit cards, dividends, and exchange traded funds.
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FAFSA is
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Free Application for Federal Student Aid
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Which of the following is not correct about college financing?
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Perkins loans are federal loan program for parents. They will let them borrow up to the total cost of college minus the aid the student receives and do not have to be repaid.
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The advantages of 529 college savings plans include:
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– Tax-deferred investment growth and federal tax-free withdrawals for qualified higher Ed expenses – Change beneficiaries if student changes mind – Out-of-state relatives can invest and Indiana taxpayers are eligible for a state income tax credit of 20%
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Which of the following is correct about ETFs?
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Exchange Traded Funds are a type of security that looks very much like an index mutual fund, but it is traded like a stock on the open market.
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Which of the following is the suggested asset allocation for the investors whose ages are between 20 and 30?
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Stock: 80-90% Bonds: 0-5% Cash: 10-15%
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All of the following are the strategies for making good financial decisions, except:
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Filing Personal Bankruptcy
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Which of the following order of investment is correct from most risky to least risky?
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Stocks Mutual Funds Real Estate Bonds
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If you buy 100 shares of XYZ stock at $20 per share and pay $15 commission for your transaction, the total cost/amount of your investment is?
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$2,015
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Net Asset Value is
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The daily value of a mutual fund that includes all the assets minus the fund’s liabilities converted to a per-share price.
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Which of the following mutual fund type has the lowest expense ratio?
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Index Funds
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Are these all correct? -Three ways to make money with mutual funds: 1. Interest, dividends, capital gains from holdings of the fund; 2. Capital Gains from sale of profitable investments; 3. Appreciation in NAV. -Index funds are passively managed – Capital gains result when an asset is sold for a profit
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All of the above are correct
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The reduction of risk by spreading investment dollars over numerous stocks and or bonds to minimize the impact should one of the investments turn bad is called
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Diversification
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Reinvesting earnings from a mutual fund account is
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A process that automatically buys more shares of the fund.
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A fee charged to defray the costs of advertising and marketing for a mutual fund is called a ____ fee.
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12b-1
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The dollar market value of a fund which is calculated by multiplying all of the company’s outstanding shares by the current price per share is called
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Market Capitalization
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Expense ratio
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Captures all the operating expenses of the fund and is expressed as a percentage of the fund’s assets
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Many mutual funds charge a commission or sales fee every time they are purchased by investors. These are called
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Load funds
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A legal document required by the Securities and Exchange Commission that details all the information investors need to know about an investment, including the risk of losing money is called
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Prospectus
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If you bought a stock on June 15, 2010, and sold it on July 15, 2011, you would likely be classified as a(n)
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Investor
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Which type of stocks have following properties? They represent mature, stable companies that pay consistent dividends. Companies that have these stocks often issue a special type of stock, called preferred stock.
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Income stocks
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Which of the following is not an important date of dividend payments?
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Release date
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Which of the following is correct about investing in stocks? -The Security and Exchange Commission is the main regulatory agency responsible for monitoring the stock markets and securities industry. -The Down Jones Industrial Average, The S&P 500 and The Nasdaq Composite are three major market indexes. -ADR -American Depository Receipts are a way for US investors to own foreign stocks without investing directly in a foreign exchange.
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All of the above
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The major stock exchanges that handle most of the transactions during the trading day in the US are
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The New York Stock Exchange and the NASDAQ
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Which of the following is not kind of mistake that can be made while buying and selling stocks? – Forgetting trading cost – Poor diversification – Speculating and giving up too soon
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All of them are mistakes
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Buy-and-hold investors
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Look for quality companies that have products and market position that will make them good investments for years to come
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ou bought 5 shares of stock at a price of $100 per share. Later you sold your 5 stock shares at a price of $95. What was the total return on your investment (gain or loss) assuming no transaction costs?
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$25 loss
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A service that lets you build your position in the company by reinvesting your dividends in more company stock is called
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A dividend reinvestment program.
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You told your broker to execute a sell order when the price of a stock drops to a specified level. The broker should use a
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Stop order or Stop-loss order

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