-Which of the following represents mutual funds showing the progression of risk

Question

-Which of the following represents mutual funds showing the progression of risk from lowest to highest?

Question 69 options:

A)

International, bond, growth, growth and income, money market

B)

Money market, bond, growth and income, growth, international

C)

Bond, growth, international, money market, growth and income

D)

Growth and income, growth, bond, money market, international

E)

Money market, growth and income, bond, international, growth

-Social Security is characterized by all of the following except:

Question 71 options:

A)

pay as you go financing through FICA taxes

B)

an accounting “Trust Fund”

C)

insurance against outliving your savings

D)

retirement benefits for all workers

E)

poverty alleviation for targeted groups

-What is the difference between a ROTH IRA and traditional IRA in terms of the federal income tax treatment of qualified contributions and distributions in retirement?

Question 73 options:

A)

ROTH IRA contributions are tax free but distributions are taxed; Traditional IRA distributions are tax free at withdrawal but contributions are taxed

B)

ROTH IRA contributions and distributions are taxed; Traditional IRA contributions and distributions are not taxed

C)

ROTH IRA contributions and distributions are tax free; Traditional IRA contributions are not taxed but distributions are taxed

D)

ROTH IRA distributions are tax free only; Traditional IRA distributions are tax free at withdrawal only

E)

ROTH IRA contributions are taxed but distributions are not taxed; Traditional IRA contributions are tax free but distributions are taxed

-How are Social Security retirement benefits determined?

Question 74 options:

A)

It depends on the number of credits a person’s parents have earned in their lifetime.

B)

It depends on the level of income a person has averaged over their lifetime.

C)

It depends on how many years you have paid in Social Security taxes.

D)

All of the above are correct.

E)

Both B and C are correct

A)

International, bond, growth, growth and income, money market

B)

Money market, bond, growth and income, growth, international

C)

Bond, growth, international, money market, growth and income

D)

Growth and income, growth, bond, money market, international

E)

Money market, growth and income, bond, international, growth

Explanation / Answer

Solution 69

Option B is correct.

Money market mutual fund schemes invests in highly liquid and highly secured short term financial instruments. Therefore, it has the lowest amount of risk. Bonds are slightly riskier as they can be both secured and unsecured. Growth and income mutual funds invests in a combination of stocks and bonds to ensure constant income and growth. Growth oriented mutual fund schemes invests highly in stocks that makes it riskier than bond and other mutual funds schemes. International mutual funds are the riskiest as it invests in stocks and bonds of other countries which adds in exchange rate and country risk.

Therefore, the correct sequence of mutual funds based on their exposure to risk is:

Money Market, Bond, Growth and Income, Growth and International.

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