Personal Finance Test 2
Terms in this set (19)
Brett plans to save money towards purchasing a car. His co-worker is telling him about a money market account he has that offers a tiered interest rate. What is Brett's co-worker talking about?
a. The amount of money he earns depends of the balance, i.e. the higher the account balance the higher the interest rate he would earn.
Dylan is preparing a presentation about saving and the presentation rubric says that he must include an explanation of compound interest. Which of the following statements would be the best one for him to include to show that he understands compunding interest?
c. Earning interest on interest
The most common relationship between risk and return in investing in investing can be stated as:
b. higher risk indicates higher return
Which of the following is a feature of a money market deposit account?
c. Tiered interest rates
Which of the following is a feature of a certificate of deposit (CD)?
a. Funds deposited in a CD are held for a certain length of time.
Which of the following is not true in regards to investing in stock?
d. A stockholder will always receive a profit when the stock is sold.
A bond is:
a. A type of debt that a company issues to investors for a specified period of time.
Simple interest is best defined as:
a. Interest earned on the principal investment
Harris is concerned about the effects of inflation on his investment returns. Which statement best describes inflation?
a. The rise in the general level of prices
Alisa is looking for an investment that is structured to have tax benefits. She should look for information on:
d. Tax-advantaged investments
Conner wants to purchase stocks with the money he received from his tax return. Who would he contact to make the transaction?
a. A brokerage firm
Hannah needs a savings tool to help her manage her everyday purchases. The savings tool needs to be very liquid and accessible. Which of the following savings tools should Hannah choose?
b. Checking account
Which statement is TRUE of mutual funds?
b. Mutual Funds are diversified investments
Kylee's Personal Finance class has been discussing the importance of understanding liquidity and she is trying to explain the term to another student. Which statement is the most correct description of liquidity?
a. How quickly and easily an asset can be converted into cash
Which of the following statements correctly describes the security level of savings tools?
b. Savings tools are secure because they are protected by the U.S. government against loss
Which statment best reflects the philosophy of "pay yourself first"?
c. An individual should set aside a predetermined amount of money for saving before using any money for spending
Elliot's stock broker is suggesting that he consider investing in a diversified portfolio. A diversified portfolio is desirable because it:
d. decreases risk by investing money in a variety of investment tools
When taking advantage of the time value of money, which of the following is most likely to result in the largest return?
b. Invest as long as possible and at the highest interest rate possible
It is best to have the rate of return on an investment than the rate of inflation.
c. Higher, to maintain purchasing power
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