This quiz is designed to give you a general assessment of your overall knowledge related to passive income.
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Question 1 of 21
Passive income is defined by the Internal Revenue Service (IRS) as unearned income.
Yes
No
Question 2 of 21
Select all the answers below that are examples of earned income:
You work at McDonald's and make $20/hour working part-time.
You made $120 in tips over the weekend working at Olive Garden.
You sold Microsoft stock last week for a 30% gain.
You go to Vegas four times a year and earn about $10,000 playing Black Jack.
You're a real estate agent in California and made $120,000 last year in commissions.
Question 3 of 21
Royalties are always considered unearned income.
True
False
Question 4 of 21
Holding a stock for over a year before selling it allows one to reduce their tax liability on capital gains.
Question 5 of 21
Another name for passive income as defined by the IRS is:
Earned Income
Unearned Income
Unintentional Income
Loss Carry Forward
W-2 Income
Question 6 of 21
A portfolio of solely dividend stocks used to generate passive income could expect to safely generate what return each year?
0 - 2%
3 - 5%
6 - 8%
9 - 12%
Question 7 of 21
In the current environment of higher interest rates, one can expect to earn 4-5% on a 12-month CD.
Question 8 of 21
The easiest way to generate passive income is to buy 5 single-family homes and self-manage the properties as a landlord.
Question 9 of 21
People who are part of the FIRE movement (financial independence, retire early) have been known to save up to 50% of their income each month.
Question 10 of 21
Dividend Kings are stocks that have increased their dividends every year for at least 50 consecutive years.
Question 11 of 21
Select all the stocks below that are currently Dividend Kings:
3M Company (MMM)
The Coca-Cola Company (KO)
Procter & Gamble (PG)
Ford Motor Company (F)
The Walt Disney Company (DIS)
Microsoft (MSFT)
Question 12 of 21
Dividend Aristocrats are stocks that have increased their dividends every year for at least 10 consecutive years.
Question 13 of 21
Some forms of passive income do require a minimum level of work. Select all the ideas below that may fall into this category of passive income:
Running a small vending machine business
Owning a laundromat and stopping by once a week to collect coins and check machines
Buying a truck to become a long-haul truck driver
Driving daily for Uber or Lyft
Swing trading cryptocurrency
Buying a 32-door apartment complex and being the on-site property manager
Question 14 of 21
A new method to buy partial ownership in real estate without ever leaving your computer to visit the investment property is called:
Co-Sharing
Option Selling
Crowdfunding
Question 15 of 21
Based on the Rule of 72, an investment with an annual rate of return of 6% would double your money in how many years:
6 years
10 years
12 years
24 years
Question 16 of 21
I-Bonds are a type of savings bond issued by the U.S. Treasury designed to protect against:
Recessions
Inflation
Stock Market crash
Crypto Losses
Question 17 of 21
Which method to generating passive income is more risky:
Day Trading Stocks
Swing Trading Stocks
Question 18 of 21
One real estate investment strategy where you purchase a property and rent out a portion of it to generate income is referred to as:
House Hacking
Real Estate Crowdfunding
Timesharing
House Flipping
Question 19 of 21
A Target Date Fund (TDF) adjusts its asset allocation mix over time, becoming more conservative in investments as you approach:
Death
Marriage
Birth of First Child
Retirement
Question 20 of 21
People invest in gold and silver coins because it's a risk free way to generate passive income
Question 21 of 21
What is the main difference between an HYSA and an HSA?
One is an account made up of high-yield dividend paying stocks where the other is for retirement savings
One is a savings account with a high interest rate where the other is a tax-advantaged account for medical expenses
Both are savings accounts but one comes with higher returns due to higher risk
Both are stock accounts but one comes with insurance from the federal government
Both cover medical expenses but one account allows the money to sit in a stock brokerage