RHS Personal Finance
Ch. 8 Worksheet
1. An investors ability to get his/her investment back with loosing very little if any of
his/her principal value determines the of the investment.
2. An account that you should have with approximately 3 to 6 months of monthly
expenses in it is called a(n) .
3. I invest today in certain types of gov’t bonds to avoid having to pay taxes on my
growth. I have invested in which type of investment?
4. A portion of the profits given to stock holders is called a(n) .
5. Hiring an individual who has been trained in financial matters to create a financial
plan for you & your family describes who in the financial world?
6. General stock available to the general public, who receives voting rights, describes
which style of stock?
7. I invest $2350 today into a CD. 1 year from now … I have $2500 available for
withdrawal. What does the $150 represent? .
8. Stock, which receives dividends prior to common stock holders receiving dividends,
but does not typically hold voting privileges describes which type of an investment?
.
9. Mr. Johnson’s investment into Sirius Satellite Radio, with the hope of earning a large
profit in a short amount of time would be considered what type of an investment?
.
10. I invest $2500 today into a speculative investment. 1 year from now … I sell my
stock for $1300. What does the $1200 difference represent to me? .
11. Having the following investments in my portfolio is an example of which key
financial term:stocks, CD’s, bonds, & real estate? .
12. I call Hollister Brand & ask them to send me a document showing their Assets,
Liabilities, Balance Sheets, Income Statements, & documents describing the
capabilities of the senior managers running the company. What am I likely to
receive in the mail or by email? .
13. An investor who doesn’t have much time to research his/her own investments, may
consider investing in which kind of investment? .
14. Most 401(k) & 403(b) retirement plans will require me to pay taxes on my
withdrawals when I retire at age 65. Which type of investment have I invested in?
.
15. A corporation that keeps a portion of its profits to use toward expansion & research
& development of new products … is the definition of which key investment term?
.
Short Answer: Section 8.1
1. List some key questions that you should ask yourself when creating your financial
Goals (P. 239).
2. Describe the concept of paying yourself first (P. 239).
3. To what point … should you contribute to your employer-sponsored retirement plan
(P. 241)?
4. Describe in detail the 5 components of risk & how they might affect your financial
situation (P. 244 – 247).
Inflation:
Interest Rate:
Business Failure:
Financial Market:
Global Investemnt:
5. Assume that inflation is constant at 3%. If I invest into a CD paying me 1.5 % … how
much buying power have I lost?
6. Assume inflation to be a constant at 3 %. If I invest into a CD paying me 5 % … how
much buying power have I lost?
7. I purchased a $1000 bond at 8 %. Interest rates have jumped over night to 11%.
What would I be able to sell my bond at today … if I don’t want to keep it until
maturity? (P. 246).
8. I purchased a $1000 bond at 8 %. Interest rates drop over night to 5.5 %. What would
I be able to sell my bond for today if I don’t want to keep it until maturity? (P. 246)
Short Answer: Section 8.2
1. Describe in detail … the four different types of investments available to most
investors. (P. 250 – 252).
Stocks:
Bonds:
Mutual Funds:
Real Estate:
2. Describe the importance of diversification in your investment portfolio. (P. 254)
3. List the 8 steps in developing a personal investment plan. (P. 255 – 256)
Short Answer: Section 8.3
1. List & describe the 4 different types of financial planners. (p. 257)
2. Explain the difference between Tax Exempt Income & Tax Deferred Income. (P. 261)
3. Describe the difference between a Capital Gain & a Capital Loss. (P. 261 – 262)
4. List the 5 different sources of investment information. (P. 262 – 263).