The Saving and Investing Workbook
Financial Literacy through 937 Questions and Answers.
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1. Earning a 5% annual return on $100, after one year will mean a new sum of: a. $105.00 b. $150.00 c. $100.50 d. $500.00 2. If we add this first-year return to the $100, and let this new amount grow at 5% for a second year, the dollar amount by which the new sum grows by in the second year will be: a. less than in the first year b. more than in the first year c. same as the first year d. either more or less than in the first year 3. Stocks can be described as: a. slices of ownership in companies b. slices of ownership in governments c. slices of debt in companies d. slices of debt in governments 4. Corporate bonds can be described as: a. slices of ownership in companies b. slices of ownership in governments c. slices of debt in companies d. slices of debt in governments 5. A company a. its earnings b. its revenues c. its cash flows d. its dividends 6. When a company makes a loss, which of the following is certain to be true: a. the revenues are negative b. cash flow will be negative c. profits will be negative d. earnings will be up 7. Well-functioning financial markets benefit from: I. transparency - the ability to see prices and get information readily II. liquidity - it is easy to buy and sell securities III. many participants IV. choice for investors in terms of investments V. a regulatory structure - in terms of how information is disclosed, insider trading laws etc. a. I only b. I and II only c. I, II and III only d. I, II, III and IV only e. I, II, III, IV and V 8. Differences between stocks and bonds include: I. stocks represent ownership, bonds typically do not II. stocks are more volatile than bonds III. there are more different bonds than stocks available IV. stocks trade on the stock market, bonds do not V. bonds often have a limited life or maturity, stocks do not a. I only b. I and II only c. I, II and III only d. I, II, III and IV only e. I, II, III, IV and V 9. In a well-functioning securities market, companies and their managements should care about the performance of their shares alongside shareholders because: I. often their compensation is linked or dependent on the performance of the shares II. they are also often shareholders III. if the share price does not perform, the management is at risk of being relieved of their duties by shareholders as a group IV. strong share price performance can create positive momentum for a business and affect the operations positively as well V. the company might want to make an acquisition and use its shares to do so, in which case having highly valued shares is a big plus a. I only b. I and II only c. I, II and III only d. I, II, III and IV only e. I, II, III, IV and V 10. The idea behind a mutual fund is: a. to pool the money of many smaller investors and invest this larger sum on their behalf b. to have many investors each with completely different returns c. to give each investor an investment in one stock d. to avoid diversification 11. A passively managed fund is most likely to offer which of the following benefits: I. lower fees II. performance that is close to the benchmark or index III. a professional portfolio manager that makes the investment decisions IV. capital protection V. twice the return of other funds a. I only b. I and II only c. I, II and III only d. I, II, III and IV only e. I, II, III, IV and V 12. True or False: Exchange traded funds allow investors to very quickly get exposure to a particular asset class - they are NOT intended to expose the investor to manager risk. 13. Which of the following statements is typically true: I. hedge funds are often less regulated than mutual funds II. one of the keys to evaluating hedge funds is to assess the investment manager III. hedge funds can employ more leverage than mutual funds IV. hedge funds are less restricted in what they can buy than mutual funds V. hedge funds can be bought with very small sums of money by all investors a. I only b. I
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About the Author
Michael Fischer is an investment professional that has been active in the financial markets for over 15 years. He spent 9 years in the Equities Division of Goldman Sachs in various roles, always working with large sophisticated investors in the areas of asset allocation, fund selection and security selection. He has since gone on to start his own company in this field. He is the author of
Literacy that Everyone Needs and Deserves to Have!' and the creator of the Saving and
Investing channel on YouTube. He is a Chartered Financial Analyst (CFA), a charterholder
of the Chartered Alternative Investment Association (CAIA) accreditation and holds an
MBA from INSEAD and a Bachelor of Science Degree from the University of Toronto in
Mechanical Engineering.