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PF 5.00 Saving And Investing (2 Of 2)
Test Description: 5.00 Saving and Investing
Instructions: Answer all questions to get your test result.
1) The most common relationship between risk and return in investing can be stated as:
A
higher risk indicates lower return
B
lower risk indicates higher return
C
higher risk indicates higher return
D
No relationship exists between risk and return
2) Which of the following statements is true in regards to paying taxes on investments?
A
Taxes are often owed on profits generated from investments
B
paid on investments when the money is placed in or removed
C
only have to be paid on employer‐sponsored investments
D
Since investments are considered unearned income,no taxes
3) Which statement is TRUE of mutual funds?
A
Mutual funds are superior purhcasing to a single stock
B
Mutual Funds are diversified investments
C
Mutual Funds are a form of real estate investment
D
Mututal Funds are speculative investments
4) Compound interest is best defined as:
A
Interest earned on the principal investment
B
Earning interest on interest
C
The effect interest has on the total return on investment
D
Any form of interest earned from saving or investing
5) Compound interest is …..
A
the effect interest has on the total return on investment
B
earning interest on interest
C
any form of interest earned from saving or investing
D
interest earned on the principal investment
6) Which statement best reflects the philosophy of “pay yourself first”?
A
save whatever money is left over after paying monthly bills
B
set aside money for saving before doing any spending.
C
pay all fixed expenses before paying flexible expenses.
D
spend money on items enjoyed in life before other expenses
7) In relation to the other options, how liquid is a savings account?
A
More liquid than cash
B
More liquid than a checking account
C
Less liquid than mutual funds
D
More liquid than a Certificate of Deposit
8) Which of the following is most likely to be a feature of a money market deposit account?
A
No minimum balance requirements
B
Unlimited transactions every month
C
Tiered interest rates
D
Money remains in the account for a specific period of time
9) It is best to have the rate of return on an investment __ than the rate of inflation.
A
Higher, to maintain purchasing power
B
Lower, in order to minimze taxes
C
Lower, in order to minimize risk
D
Higher, to minimize risk
10) To save for an emergency fund, giving up vending machine food to achieve that goal is the:
A
interest
B
specific part of the SMART goal
C
trade‐off
D
opportunity cost
11) Which is structured to have tax benefits?
A
Tax‐advantaged investements
B
Index funds
C
Tax rated bonds
D
Speculative investments
*select an answer for all questions
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