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Investing Unit Review 2

The document is a review guide for an investing unit, covering core topics such as investing basics, the stock market, bonds, investment strategies, fund investments, and retirement planning. It includes vocabulary exercises, true/false questions, and prompts for deeper understanding of concepts like active vs. passive investing and the importance of diversification. The guide aims to prepare students for assessments on investing knowledge and strategies.

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adamkhayat2021
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85 views7 pages

Investing Unit Review 2

The document is a review guide for an investing unit, covering core topics such as investing basics, the stock market, bonds, investment strategies, fund investments, and retirement planning. It includes vocabulary exercises, true/false questions, and prompts for deeper understanding of concepts like active vs. passive investing and the importance of diversification. The guide aims to prepare students for assessments on investing knowledge and strategies.

Uploaded by

adamkhayat2021
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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NGPF Unit Review

Investing
Spanish version

Investing Unit Review


PART I: CORE TOPICS

● Investing Basics: Define investing and compare it to saving and trading. Explain how the
power of compounding can build wealth over time.
● The Stock Market: Understand what stocks are, general trends in the stock market, how
stocks generate returns, and how to read stock quotes
● Bonds: Explain what a bond is, the pros and cons of investing in bonds, how interest rates
can impact bond prices, and the differences between individual bonds and bond funds
● Investing Strategies: Analyze the role risk plays in investing and how to manage risk using
strategies such as diversification and dollar cost averaging.
● Fund Investments: Define mutual funds, index funds, ETFs, and TDFs and detail their pros
and cons. Understand how they fit into active versus passive investing strategies.
● Retirement Planning and Modern Tools: Understand how investing can be used to build
wealth for retirement. Research different retirement accounts and how tools such as
robo-advising and AI are changing the investing landscape.

Part II: VOCABULARY

Use the word bank to complete the fill-in-the-blank questions below. You can find key vocabulary
terms and definitions in the Personal Finance Dictionary.

Active Trading Individual Retirement Risk


Asset Allocation Account (IRA) Robo-Advisor
Bond Inflation Roth IRA
Brokerage Account Investing S&P 500
Compound Return Investment Shareholder
Coupon Mutual Fund Social Security
Diversification Passive Investing Stock
Dividend Pension Target Date Fund (TDF)
Dollar Cost Averaging Portfolio Traditional IRA
Exchange-Traded Fund (ETF) Purchasing Power Traditional 401(k) Plan

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Index Fund Rate of Return

1. As an investor, when you purchase a(n) ___________________________


bond from a company, you are

lending the company money which it promises to repay with interest by a certain date.

2. As ___________________________
inflation increases, the purchasing power of the dollar decreases,

which impacts how much you can buy in goods and services.

3. Investors can purchase shares in an actively managed ___________________________,


mutualfund which

pools money from many people to buy a diversified portfolio of stocks, bonds, or other

securities.

4. For someone like Sarah who prefers a hands-off approach to investing, a(n)

___________________________
roboadvisor can automatically manage her portfolio based on her risk

preferences.

5. A retirement savings option that automatically adjusts the asset mix as your retirement

date approaches is known as a(n) ___________________________.


target date fund
6. Mike uses the strategy of ___________________________
cost to minimize the impact of the
dollar aug
market’s ups and downs. He invests the same amount of money at regular intervals over

time.

7. The interest calculated on both the money you’ve invested and the accumulated interest

from previous periods is known as ___________________________.


compound interest

8. To reduce risk in her investment portfolio, Emily uses the strategy of

___________________________,
diversification making sure she invests in a variety of assets like stocks, bonds,

funds, and more.

9. In a(n) ___________________________, employees can contribute a portion of their salary on a


401K
pre-tax basis, which is then invested for retirement savings.

10. When a company makes a profit, it may choose to pay part of those profits back to its

shareholders in the form of a(n) ___________________________.


dividend

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PART III: CORE CONCEPTS

Answer the following questions to review the core content you've learned in this unit.

Semester Course

11. Describe the differences between investing, saving, and trading in the table below:

Investing Saving Trading

Investinginvolveslongtermapproach
Focused on buildingwealth
typically forgoalslikeretirement

12. A ____________ (bull/bear) market is when more investors are buying stocks, which
Bull
causes stock values to increase. A ____________
bear (bull/bear) market is when investors are
selling stocks, which causes stock values to decrease.

13. What is an advantage of using a robo-advisor to invest?


abilityofferlowerfees lowerminimuminvestmentrea makingprof invest
lowcostandaccess
abuisemore accessible to a wider rangeofince

14. Identify whether each statement is TRUE or FALSE.

a. Social security is a government program that pools contributions from current


workers to then provide retirement support benefits to those who are eligible: True
______
b. You will need slightly LESS income in each year of retirement:false
______
c. The longer your retirement the MORE money you need to have saved: True______
d. The longer your retirement, the MORE money you’ll be able to withdraw each year
______
False

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15. Laura wants to start investing and is eager to buy and sell individual stocks. Why might
this be the WRONG thing for her to start doing? What do you suggest she do instead?

This might be wrong because Laura is inexperienced and its hard to understand the
companies, industry, and market as a beginner. A suggestion I would give to Laura is to
start with index funds or ETFs because they provide exposure to stock and helps diversify
her investment.

16. Identify 3 things that can impact a stock’s price.

How well the company is performing, how well the market is performing like in ation,
and supply and demand.

17. Match the following terms with their definitions:

a. Stock: I. The price of a stock that is listed on an


exchange
b. Stock Quote: II. An action where a company increases
c. Stock Split: the number of shares outstanding and
lowers the individual value of each share
III. An investment option that allows you to
own a small piece of a company

18. Complete the following statements:

a. The higher the risk associated with a bond, the more


______ (more/less) likely a corporation
might default on paying the investor. Interest rates for riskier bonds tend to behigher
______
(higher/lower) so that investors are more
______ (more/less) willing to take on that risk.
b. When overall interest rates rise (to 10%), the bond you already own (with 5% coupon
rate) becomes less
______ (more/less) valuable to potential buyers, so its price will decrease
______
(increase/decrease).
c. When overall interest rates fall (to 2%), the bond you already own (with 5% coupon
rate) becomes more
______ (more/less) valuable to potential buyers, so its price will increase
______
(increase/decrease).

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19. Explain the difference between active investing and passive investing.

Active Investing Passive Investing

passiveinvesting
fEstehtfctshff.ie c's c
teetering spes

20. What is one difference between an IRA and a 401(k)?

21. Match the following fund types with their description:

a. Mutual Fund: I. Pools money from many investors to buy a


diversified portfolio of stocks, bonds, and other
b. Index Fund: securities, managed by a professional for a fee
c. Exchange-Traded Fund II. Adjusts its asset allocation and risk level over time
(ETF): based on a specific retirement goal date.
III. Aims to mirror the performance of a specific
d. Target-Date Fund (TDF) index, like the S&P 500, by holding all or most of
the securities in the index.
IV. Can be bought and sold on the stock market, just
like individual stocks.

22. In your own words, explain what a brokerage account is and how it is different from a
bank account.

23. How is a bond different from a bond fund?

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24. How does an investor make a profit from investing in a stock?

25. Why is it important to invest for retirement?

26. True or False?: Roth IRAs are a good option for people who have relatively lower
incomes - and tax rates - compared to what they expect to have in the future.

27. Explain the benefit of starting to invest early.

28. How can diversification help lower your investment portfolio’s risk?

Full-Year Course

29. Explain how someone who does illegal insider trading has an unfair advantage over
other investors.

30. Investors often try to minimize the taxes they pay by holding investments for a
___________________________ (shorter/longer) time period in order to pay
___________________________ (short-term/long-term) capital gains tax.

31. You’re trying to figure out what the purchasing power of your money will be. Should
you use the real rate of return or nominal rate of return? Explain.

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Part IV: Kahoot or Quizizz

Follow your teacher’s instructions to complete the review game. Then, answer the question.

32. What are the 2-5 topics that you need to review the most?

www.ngpf.org Last updated: 7/15/24


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