Saving for retirement can be tough, to say the least. But if you think your nest egg is well-feathered, then this quiz shouldn't be a problem.
Which of the following terms describes the interest due on a bond since the last interest payment was made?
Accrued interest
Prime rate
Dividend
Assets
Correct Answer
Wrong Answer
Bondholders usually pay interest every six months. However, the interest that the bondholder accrues is on a day-to-day basis. When the bondholder sells the bond, the buyer pays the seller the market price plus the accrued interest.
Which term below describes a declining stock market?
Dog
Bear
Bull
Fox
Correct Answer
Wrong Answer
Bear markets are those that are in decline or have investors that are generally pessimistic and believe investments will fall. Bull markets are when stocks are increasing and investors are making money.
The stock of which of these companies is not considered a blue chip?
Microsoft
Left Behind Games
Disney
Walmart
Correct Answer
Wrong Answer
Disney, Microsoft and Walmart are ell-known companies and their stock is very expensive. Left Behind Games produces software for a niche market. In mid-January 2011 its stock was trading for less than $1.
A series of payments made periodically for a specific period.
The actual piece of paper that is evidence of ownership of a corporate stock.
A large transaction of stock.
Correct Answer
Wrong Answer
Annuities are a series of payments made periodically for a specific period. Insurance companies sell annuities that provide payments at specific intervals, usually during retirement.
What is the profit from the sale of a capital asset called?
Commission
Commodity
Capital gains
Capital sale
Correct Answer
Wrong Answer
Whenever you sell something like a stock or a home in which you reap a profit, you are earning capital gains. You are required to pay capital gains taxes on most profits.
Which of the following is more likely to depreciate over time?
Motor vehicle
Primary home
Rental property
Business property
Correct Answer
Wrong Answer
Property is a better investment than motor vehicles because property will gain in value over the long haul. However, many people invest in classic cars.
What is the name for a company plan that allows employees to set aside tax-deferred income for retirement?
526(k)
IRA
401(k)
Pension plan
Correct Answer
Wrong Answer
Congress named the 401(k) plan, which allows employees to contribute to their retirement tax free, for a specific section of the Internal Revenue Service Code.
Mutual funds take money from thousands of small investors and use the cash to buy a combination of stocks, bonds and other types of securities.
Mutual funds contain only bonds issued by a state or political subdivision.
Mutual funds contain strictly blue chip stocks.
Mutual funds contain various IRAs.
Correct Answer
Wrong Answer
Mutual funds are easy and inexpensive ways to diversify investments because they combine the money of small investors to buy stocks, bonds and other types of securities.
What is one way to avoid a penalty for using money in your 401(k) too early?
Withdrawing the total amount at age 50.
Borrowing against the account.
Withdrawing a portion of the total amount to pay down a debt.
Withdrawing the total amount to purchase a house.
Correct Answer
Wrong Answer
You won't be taxed or penalized for borrowing against your 401(k), however, you will need to pay the money back. If you simply withdraw the money before you retire, you will take a financial hit.