FMLY 2400: SAVING AND INVESTING
Exam Questions With Correct Answers
What kind of questions to ask before investing - answer✔-what will the money be used for and
how much will be needed?
-how will that money be obtained?
-how long will it take to obtain the money?
-how much risk am I willing to assume?
-are goals reasonable and is there a willingness to sacrifice current consumption to invest?
-what possible economic and personal conditions could alter investment goals?
-what will happen if the goals arent reached?
-are the goals reasonable?
top 10 investing mistakes - answer✔1. destination unknown
2. being short sighted
3. buy first - learn later
4. theres nothing to it
5. too much of one or too little of everything
6. following hot stock tips
7. the I like their products philosophy
8. doing the wrong thing at the wrong time
9. taxes? what taxes?
10. risk? what risk?
before investing: do a financial checkup - answer✔-living within means?
-high interest debt reduced?
-adequate insurance protection in place?
-has an emergency fund been started?
-is there access to other sources of cash for emergencies
saving money to begin investing - answer✔-pay yourself first
-participate in elective savings programs
-make extra effort to save 1 or 2 months/year
-take advantage of employer sponsored retirement programs
-take advantage for any gifts, inheritance, windfall
factors affecting choice of investments - answer✔1. safety and risk
2. form in investment return
3. investment liquidity
safety in an investment meaning - answer✔-minimal risk of loss
-potential return on any investment should be directly related to the risk the investor assumes
risk tolerance - answer✔how comfortable the investor is with uncertainty
speculative risk - answer✔high risk investment made in the hope of earning a relatively large
profit in a short time
higher potential income investments - answer✔-speculative stocks
-certain bonds
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