Quiz: Building Your Nest Egg

Estimated Completion Time
3 min
Quiz: Building Your Nest Egg
Image: iStockphoto/XBitter Productions

About This Quiz

Saving for retirement can be tough, to say the least. But if you think your nest egg is well-feathered, then this quiz shouldn't be a problem.
Which of the following terms describes the interest due on a bond since the last interest payment was made?
Accrued interest
Prime rate
Dividend
Assets
Correct Answer
Wrong Answer

Bondholders usually pay interest every six months. However, the interest that the bondholder accrues is on a day-to-day basis. When the bondholder sells the bond, the buyer pays the seller the market price plus the accrued interest.

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Which term below describes a declining stock market?
Dog
Bear
Bull
Fox
Correct Answer
Wrong Answer

Bear markets are those that are in decline or have investors that are generally pessimistic and believe investments will fall. Bull markets are when stocks are increasing and investors are making money.

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Which term or word best describes a company known for its ability to make money?
Corporation
Blue chip
Bond rating
Broker
Correct Answer
Wrong Answer

Blue chip companies are usually large, national firms with a solid record of earnings. Blue chip stocks are generally worth more than other stocks.

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The stock of which of these companies is not considered a blue chip?
Microsoft
Left Behind Games
Disney
Walmart
Correct Answer
Wrong Answer

Disney, Microsoft and Walmart are ell-known companies and their stock is very expensive. Left Behind Games produces software for a niche market. In mid-January 2011 its stock was trading for less than $1.

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What is an annuity?
All shares representing ownership of a business.
A series of payments made periodically for a specific period.
The actual piece of paper that is evidence of ownership of a corporate stock.
A large transaction of stock.
Correct Answer
Wrong Answer

Annuities are a series of payments made periodically for a specific period. Insurance companies sell annuities that provide payments at specific intervals, usually during retirement.

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Which of the following is considered a bad credit score?
520
700
789
796
Correct Answer
Wrong Answer

The chances of you buying that new BMW with a 520 credit score are slim and none.

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What is the profit from the sale of a capital asset called?
Commission
Commodity
Capital gains
Capital sale
Correct Answer
Wrong Answer

Whenever you sell something like a stock or a home in which you reap a profit, you are earning capital gains. You are required to pay capital gains taxes on most profits.

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In the financial world, what do the letters "CD" stand for?
Certificate of Dividend
Certificate of Deposit
Cash on Demand
Cash Depreciation
Correct Answer
Wrong Answer

There are two basic types of CDs, or Certificates of Deposit -- traditional and negotiable. CDs have a maturity date and an interest rate.

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Which of the following is the correct term to describe the act of spreading investments among different types of securities and companies?
Consolidation
Convertible
Diversification
Debenture
Correct Answer
Wrong Answer

A diversified portfolio includes a variety of investments including of stocks, bonds and mutual funds.

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Which of the following is more likely to depreciate over time?
Motor vehicle
Primary home
Rental property
Business property
Correct Answer
Wrong Answer

Property is a better investment than motor vehicles because property will gain in value over the long haul. However, many people invest in classic cars.

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Which is the correct term that describes a corporation that owns the securities of another company?
Holding company
Financial regulatory company
Independent broker
Investment company
Correct Answer
Wrong Answer

Holding companies own enough stock in other firms to control management and operations of those firms.

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Which of the following best describes a company or trust that uses its capital to invest in other companies?
Investment company
Holding company
Financial regulatory company
Independent broker
Correct Answer
Wrong Answer

Investment companies pool the funds of investors and use that money to buy various securities.

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What is the name for a company plan that allows employees to set aside tax-deferred income for retirement?
526(k)
IRA
401(k)
Pension plan
Correct Answer
Wrong Answer

Congress named the 401(k) plan, which allows employees to contribute to their retirement tax free, for a specific section of the Internal Revenue Service Code.

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Why are Individual Retirement Accounts so appealing?
IRAs provide significant tax advantages.
IRAs only include blue chip stocks.
IRAs are always low-risk investment vehicles.
IRAs are part of a well-rounded investment portfolio.
Correct Answer
Wrong Answer

IRAs give investors a huge tax benefit. Some IRAs defer taxes until investors withdraw the money.

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What's the main difference between a Roth IRA and a regular IRA?
A Roth IRA requires that taxes be deferred on income contributed to the account.
A Roth IRA requires that investors provide significant upfront capital.
A Roth IRA requires that taxes be paid upfront on income contributed to the account.
A Roth IRA requires that the investor be at least 62 years of age.
Correct Answer
Wrong Answer

Those that have a Roth IRA will save oodles of cash because they pay taxes on their contributions, not on their withdrawals.

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Which is the best definition of a mutual fund?
Mutual funds take money from thousands of small investors and use the cash to buy a combination of stocks, bonds and other types of securities.
Mutual funds contain only bonds issued by a state or political subdivision.
Mutual funds contain strictly blue chip stocks.
Mutual funds contain various IRAs.
Correct Answer
Wrong Answer

Mutual funds are easy and inexpensive ways to diversify investments because they combine the money of small investors to buy stocks, bonds and other types of securities.

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What's a "penny stock?"
Stocks that sell for less than $1 a share.
Stocks that sell for at least $15 a share.
Stocks of emerging companies.
Stocks of established companies.
Correct Answer
Wrong Answer

Most penny stocks -- those that trade for less than $1 -- have less than $1 million in assets.

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What is the arrangement in which a homeowner borrows against the equity in his or her home and receives regular monthly payments from the lender?
Mortgage bond
Reverse mortgage
Refinanced mortgage
Adjustable mortgage rate
Correct Answer
Wrong Answer

A reverse mortgage allows a homeowner to receive tax-free, monthly payments based on the equity in their home.

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What is one way to avoid a penalty for using money in your 401(k) too early?
Withdrawing the total amount at age 50.
Borrowing against the account.
Withdrawing a portion of the total amount to pay down a debt.
Withdrawing the total amount to purchase a house.
Correct Answer
Wrong Answer

You won't be taxed or penalized for borrowing against your 401(k), however, you will need to pay the money back. If you simply withdraw the money before you retire, you will take a financial hit.

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What do you call a person who is willing to risk a lot of money in the hope of a higher gain?
Speculator
Broker
Principal
Registrar
Correct Answer
Wrong Answer

Speculators try to predict the future in the hopes of making fast money.

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