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The Passive Income Quiz

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.

A

Yes

B

No

Question 2 of 21

Select all the answers below that are examples of earned income:

(Select all that apply)
A

You work at McDonald's and make $20/hour working part-time.

B

You made $120 in tips over the weekend working at Olive Garden.

C

You sold Microsoft stock last week for a 30% gain.

D

You go to Vegas four times a year and earn about $10,000 playing Black Jack.

E

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.

A

True

B

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.

A

True

B

False

Question 5 of 21

Another name for passive income as defined by the IRS is:

A

Earned Income

B

Unearned Income

C

Unintentional Income

D

Loss Carry Forward

E

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?

A

0 - 2%

B

3 - 5%

C

6 - 8%

D

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.

A

True

B

False

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.

A

True

B

False

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.

A

True

B

False

Question 10 of 21

Dividend Kings are stocks that have increased their dividends every year for at least 50 consecutive years.

A

True

B

False

Question 11 of 21

Select all the stocks below that are currently Dividend Kings:

(Select all that apply)
A

3M Company (MMM)

B

The Coca-Cola Company (KO)

C

Procter & Gamble (PG)

D

Ford Motor Company (F)

E

The Walt Disney Company (DIS)

F

Microsoft (MSFT)

Question 12 of 21

Dividend Aristocrats are stocks that have increased their dividends every year for at least 10 consecutive years.

A

True

B

False

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:

(Select all that apply)
A

Running a small vending machine business

B

Owning a laundromat and stopping by once a week to collect coins and check machines

C

Buying a truck to become a long-haul truck driver

D

Driving daily for Uber or Lyft

E

Swing trading cryptocurrency

F

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:

A

Co-Sharing

B

Option Selling

C

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:

A

6 years

B

10 years

C

12 years

D

24 years

Question 16 of 21

I-Bonds are a type of savings bond issued by the U.S. Treasury designed to protect against:

A

Recessions

B

Inflation

C

Stock Market crash

D

Crypto Losses

Question 17 of 21

Which method to generating passive income is more risky:

A

Day Trading Stocks

B

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:

A

House Hacking

B

Real Estate Crowdfunding

C

Timesharing

D

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:

A

Death

B

Marriage

C

Birth of First Child

D

Retirement

Question 20 of 21

People invest in gold and silver coins because it's a risk free way to generate passive income

A

True

B

False

Question 21 of 21

What is the main difference between an HYSA and an HSA?

A

One is an account made up of high-yield dividend paying stocks where the other is for retirement savings

B

One is a savings account with a high interest rate where the other is a tax-advantaged account for medical expenses

C

Both are savings accounts but one comes with higher returns due to higher risk

D

Both are stock accounts but one comes with insurance from the federal government

E

Both cover medical expenses but one account allows the money to sit in a stock brokerage

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