FlexiQuiz - QAI - Module #3 Quiz

1. What is the average return over a 10-year period in the public markets (S&P 500)?

4% - 7%

10% - 15%

5% - 10%

15% - 20%

8% - 12%

2. If a Private Investor A (PIA) made a $200 investment in Startup X and, upon Startup X’s acquisition, $4500 was returned to PIA, the rate of return would be

100%

1750%

1150%

4500%

2150%

3. Which of the following is NOT considered a risk mitigation strategy for sophisticated investors?

All answers are correct

Attempting to time the market

Chasing returns with a set process

Having a diverse portfolio

Showing patience in investment choices

4. How can a self-directed individual retirement account (SDIRA) benefit investors with regards to tax?

All answers are correct

Allows them to avoid tax entirely on startup investments

Permits tax-deferred growth on startup investments until the funds are withdrawn during retirement

It does not offer any tax benefits

Allows them to claim losses as a tax credit

5. Which of the following is a restriction associated with a self-directed IRA?

The account cannot be used for personal benefit or engage in transactions with certain disqualified persons

All withdrawals are completely tax-free

None of the answers are correct

It allows unlimited contributions without any cap

The investments made through it cannot be in startups

6. Which of the following is a potential benefit of experiencing losses on your investments?

They can be used to offset investment income, potentially reducing tax liability

All answers are correct

They allow you to avoid capital gains tax entirely

You can ignore them when filing your taxes

They can be claimed as a credit on state tax returns

7. Which formula represents the calculation of Future Value (FV)?

FV = PV + (r x n)

FV = PV / (1 + r)^n

None of the answers are correct

FV = PV x r^n

FV = PV (1 + r)^n

8. Private Investor A (PIA) is contemplating a $100 investment in Startup X. Given the high risks associated with the deal, PIA is modeling a 50% compounded annual return on the investment over a 7-year period at which point she projects that Startup X will be acquired. Based on these assumptions, the future value of PIA’s investment is estimated to be

$5008.59

$2708.59

$2008.59

$1708.59

$1508.59

9. How is the simple rate of return calculated?

None of the answers are correct

[(Current Value / Initial Value) - 1] x 100

[Current Value / (Initial Value x 100)]

[(Current Value + Initial Value) / Initial Value] x 100

[(Current Value - Initial Value) / Initial Value] x 100

10. What is the perceived benefit of diversification within asset classes?

It guarantees high returns on investments

It increases the chances of losing money due to the failure of a single investment

All answers are correct

It amplifies the risk associated with market fluctuations

It reduces the risk associated with the failure of any one investment

11. What does it mean to diversify "across asset classes"?

Putting all your investments in real estate

Investing all your money in a single startup

Investing only in stocks from different sectors

All answers are correct

Spreading investments across different types of assets such as stocks, bonds, real estate, etc.

12. What is the capital gains tax applicable to?

All answers are correct

Gains from selling assets at a profit

Losses incurred from startup investments

Only assets held for less than one year

Investment in stocks only

13. Why is a unit of currency today considered to be worth more than the same unit in the future, according to the Time Value of Money principle?

[A] Due to the potential to earn interest over time

[B] Because of inflation

[C] Because of Returns

[A] and [B] are correct

[B] and [C] are correct

14. Private Investor A (PIA) invests $5,000 in StartupX. Three years later, StartupX is acquired and PIA receives $25,000 (5x return). PIA’s long-term capital gain on the sale is

$35,000

$20,000

$25,000

$30,000

$5,000