Quiz: Do You Understand Financial Jargon?

Five questions to test what you know

April 22, 2008

"Active management," "asset class," and "basis point" are just a few of the terms people in the financial services industry use every day that casual investors and retirement savers may not understand. AARP Financial developed a Jargon Quiz to determine people's knowledge of financial terms. You can test your investing savvy with these sample questions.

The term "basis point" refers to:
1. One-hundredth of 1 percentage point (for example, a 2.5 percent interest rate is 50 basis points lower than a 3 percent rate)
2. A measurement used to describe an optimal increase in your portfolio
3. A 1 percent change in the S&P 500
4. Another term for down payment
5. A ballet position
6. I'm not sure
True or false: Contributions to a Roth IRA are not tax deductible.
1. True
2. False
3. Not sure
4. What's a Roth IRA?
The term "expense ratio" refers to:
1. The relationship between how much you spend and how much you save
2. A ratio that compares a company's operating expenses to net sales
3. The relationship between a mutual fund's annual operating expenses and its net assets
4. The cost of a double cheeseburger at your favorite fast-food restaurant
5. A ratio used to describe the relationship between a product's price and inherent value
NAV stands for:
1. Net accumulated value
2. Negative allocation variance
3. Net asset value
4. Not accessible view
Which of the following is not used for retirement investing?
1. 401(k)
2. 403(b)
3. 501(c)(3)
4. IRA