1. You just won $10,000 in the lottery. Congratulations What do you do

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University Challenge
Financial Component of Wellness
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Money Doesnt Bring Happiness But It
Can Calm the Nerves French Proverb
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Financial Wellness
People with high financial well-being
- may have a lot of money or a little, but
either way
- they are able to live within their means,
- they are aware of where their money goes,
- they have a budget that they stick to,
- they have a long-range financial plan,
- they are aware of and meet their financial
obligations
- they generally have a comfortable relationship
with money.
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Investment Goals Guidelines

• Return Objectives
• Risk Tolerance
• Time Horizon
• Liquidity Needs
• Tax Issues
• Legal and Regulatory
• Unusual Circumstances

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1. A mutual funds performance is best measured
by

• Income return
• Total return
• Yield
• Capital gains distributions.
• Dont know.

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2. If a fund charges an expense ratio of 1 in
2002

• You will pay a one-time fee amounting to 1 of
  the number of shares held in the account
• Your fund investments returns will be reduced by
  1 in 2002
• Your fund investment is reduced by 1 at the time
  you buy shares.
• You will pay a sales charge of 1 to a broker at
  the time you by shares.

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3. Common stocks always provide higher returns
than bonds or money market investments.

• True
• False

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4. When you invest in an employers
retirement savings plan such as a 401 (k), your
contributions are taxed

• When you withdraw them during retirement.
• Before you invest them.
• Once a year on or before April 15
• When you reach 65
• Dont know

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5. If interest rates decline, the price of an
existing bond or bond fund generally will

• Increase
• Decrease
• Stay about the same
• Dont know.

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6. A funds after-tax return may be influenced
by

• The funds pretax return
• The funds buying and selling of securities
• The funds distribution of capital gains and
  dividends
• All of the above
• Dont know

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7. The goal of an index mutual fund is to

• Track the investment return of a specified stock
  or bond benchmark.
• Beat the investment return of a specified stock
  or bond benchmark.
• Buy only stocks in Standard Poors 500 Index.
• Invest in the best-performing sectors of the
  stock market.
• Dont know.

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8. If you invest in a 401(k) plan at work, you
are not eligible to contribute to an IRA

• True
• False

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9. Dollar-cost averaging is

• A strategy that entails buying low and selling
  high.
• A way to sell fund shares to minimize capital
  gains.
• An approach in which you invest the same amount
  of money in a fund at regular intervals.
• None of the above.
• Dont know.

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10. From 1926 to 2001, the average total return
per year for the U.S. stock market was

• 4 per year.
• 11 per year.
• 22 per year.
• 33 per year.
• Dont know.

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11. Mutual funds are insured by the Federal
Deposit Insurance Corporation

• True
• False

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12. If two mutual funds hold the same
securities, but one has higher operating expenses
than the other, which of the following statements
is true?

• The fund with the higher expenses will have a
  higher return.
• The fund with the lower expenses will have a
  higher return.
• You cant say which fund would have a higher
  return, because expenses have no effect on
  returns.
• None of the above
• Dont know.

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13. According to a recent tax law change,
investors under age 50 can contribute up to ___
to their IRA for 2005.

• 4,000
• 2,000
• 3,000
• 5,000
• Dont know.

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14. If you own only U.S. stocks in your
investment portfolio, you can reduce your overall
risk by adding international stocks.

• True
• False

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15. Which of the following is not an attribute
of mutual funds?

• Diversification
• Professional management
• Guaranteed return
• None of the above.
• Dont know.

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16. Which type of investment has generally
offered the best protection against inflation
over long periods of time?

• Money market funds and bank accounts
• Government National Mortgage Association
  securities (Ginnie Maes)
• Stocks
• Corporate Bonds
• Dont know.

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17. Income earned on municipal bonds or
dividends paid by municipal bond funds are
generally exempt from federal income tax.

• True
• False

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18. A charge to purchase mutual fund shares is
frequently called

• A bid/ask spread.
• An expense ratio.
• A sales load.
• A price/earnings ratio.
• Dont know.

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19. Generally, a portfolio that has 80 of its
assets invested in stocks would be best suited
for

• An 18-year-old using the assets to pay for
  college expenses over the next 4 years.
• A 35-year-old investing for retirement
• A 75-year old investing for income and capital
  preservation.
• None of the above.
• Dont know.

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20. If you invest in a long-term bond fund with
an average maturity of 10 years, you must hold
the investment for at least 10 years.

• True
• False
• Dont know.

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Diversification Works
Large stocks SP 500 Large growth stocks SP
500/Barra Growth Index Large value stocks SP
500/Barra Value Index Small stocks Russell 2000
Index Small growth stocks Russell 2000 Growth
Index Small value stocks Russell 2000 Value
Index Intl stocks MSCI EAFE Index Bonds
Lehman Brothers Aggregate Bond Index.