Other Investments

Q U E S T I O N   1 :
Why might an investor seeking a safe short-term investment opt for a money-market fund over a CD?
	a)	Money-market funds are liquid; investors aren't penalized for early withdrawal.
	b)	Money-market funds typically offer double-digit returns.
	c)	CDs generally require a two-year commitment.
	d)	MP3 will render the CD obsolete by 2003.
Q U E S T I O N   2 :
When it comes to CDs, what's the salient difference between annual percentage yield (APY) and annual percentage rate (APR)?
	a)	The APY discounts money put away for cost-of-living expenses.
	b)	The APR is simply the interest rate the investor will earn for the year, while the APY includes money earned from compounding income investment returns.
	c)	The APR follows the APY in an alphabetical listing of fixed-income investments returns.
	d)	The APY can change day-to-day while the APR is fixed.
Q U E S T I O N   3 :
CDs yield low returns and aren't particularly flexible. Why would an investor buy one?
	a)	The investment is FDIC insured -- i.e., safe -- and the returns are locked in at a predetermined rate.
	b)	A CD's rate of return can fluctuate higher with a positive economic growth report.
	c)	Over 20-year stretches CDs outperform stocks and bonds because they have fewer down years.
	d)	The investor is delusional.
Q U E S T I O N   4 :
What is an annuity?
	a)	A tax-free investment that masquerades as an insurance plan.
	b)	A yearly payment on money invested when an individual turns 59 1/2.
	c)	A portion of a corporation's profits that is paid quarterly to employees.
	d)	A fixed-rate, fixed-term, government-backed security.
Q U E S T I O N   5 :
What's the difference between a variable annuity and a fixed annuity?
	a)	A fixed annuity guarantees a set interest rate over a certain period of time while a variable annuity's returns depend on the movement of a variety of investment vehicles.
	b)	Variable annuities generally yield much lower returns because they are tied to the performance of extremely volatile stocks in dangerous sectors.
	c)	Fixed annuities are more popular because they return an investor's principal in the case of premature death.
	d)	Variable annuities lock in rates while fixed annuities do not.
Q U E S T I O N   6 :
Why should you never buy an annuity for an IRA account?
	a)	Contributions to an annuity are limited based on income.
	b)	The insurance component is superfluous in a retirement account.
	c)	Because you already enjoy the benefit of tax-advantaged savings in an IRA without the high fees.
	d)	Because annuities expire at age 60, instead of 59 1/2.
Q U E S T I O N   7 :
What is a guaranteed investment contract?
	a)	The right for an investor to buy a stock or mutual fund at a certain price.
	b)	A promise by the contract issuer to pay back all investment losses.
	c)	An extremely volatile retirement plan favored by Europeans.
	d)	An agreement between an insurance company and a corporate retirement plan to offer investors a fixed rate of return.
Q U E S T I O N   8 :
How much do GICs typically return?
	a)	At least 10%
	b)	Low single digits
	c)	About what intermediate bonds are returning
	d)	Whatever the S&P 500 is returning