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Personal Finance 5.02-5.03Study Guide Review
Test Description: Study Guide Review
Instructions: Answer all questions to get your test result.
1) Which is a feature of a certificate of deposit (CD)?
A
Funds deposited in a CD are very liquid
B
Funds deposited in a CD are held for a certain length of time.
C
Funds deposited in a CD have tiered interest rates.
D
Funds deposited in a CD can be accessed via check or debit card.
2) In relation to 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
3) Which savings tool is the most liquid?
A
Money market deposit account
B
Certificate of deposit
C
Any of the above savings tools
D
Checking account
4) Which is a feature of a money market deposit account?
A
No minimum balance requirements
B
The money must remain in the account for a specific period of time
C
Unlimited transactions every month
D
Tiered interest rates
5) Which correctly describes the security level of savings tools?
A
Savings tools are secure because they are protected by the U.S. government against loss.
B
Savings tools are very secure because there are not risks involved with saving or investing
C
None of the above is true. It would be safer to keep the money at home in a shoe box.
D
Savings tools are not secure because they have a high risk of losing money
6) Which best describes a tiered Money Market account?
A
The amount of money he earns depends on the balance, i.e. the higher the account balance the higher the interest rate he woul
B
A tiered account is promoted by scam artists who trick people into investing money
C
The amount of money he earns depends on the number of accounts he has at the depository institution
D
The rate of interest earned increases over time
7) Who would a person contact to invest money in the stock market?
A
A real estate agent
B
A brokerage firm
C
The New York Stock Exchange
D
Conner should complete this transaction on his own
8) The most common relationship between risk and return in investing can be stated as:
A
no relationship exists between risk and return
B
lower risk indicates higher return
C
higher risk indicates lower return
D
higher risk indicates higher return
9) Which statement is true of mutual funds?
A
Mutual funds are superior purchasing to a single stock
B
Mututal funds are speculative investments
C
Mutual funds are a form of real estate investment
D
Mutual funds are diversified investments
10) Which is not true with regard to investing in stock?
A
A stockholder will always receive a profit when the stock is sold.
B
A stockholder owns a part of a company
C
Depending upon the current market price, stockholders may pay different prices for the same stock
D
A stockholder may or may not receive a dividend
11) In relation to the rate of inflation, it is best to have the rate of return on an investment:
A
higher, to minimize risk.
B
lower, in order to minimze taxes
C
higher, to maintain purchasing power
D
lower, in order to minimize risk
12) Which statement best describes inflation?
A
The projected value of an investment at the end of a specified time frame
B
The number of times something happens to money
C
The uncertainty about the return on an investment
D
The rise in the general level of prices
13) Elliot’s stock broker is suggesting that he consider investing in a diversified portfolio. A diversified portfolio is desirable because it:
A
limits investor choices to only one or two investment tools
B
increases the risk/return ratio
C
decreases risk by investing money in a variety of investment tools
D
indicates an investor is a good predictor of the return an investment will have.
14) A bond is
A
a share of ownership in a company
B
a type of debt that a company issues to investors for a specified period of time.
C
a type of investment that has the potential for significant fluctuations over a short period of time.
D
a type of investment that is only offered by depository institutions
15) Which is an example investment that is structured to have tax benefits
A
index funds
B
speculative investments.
C
tax-advantaged investments
D
tax-rated bonds
16) Which statement is true with regard to paying taxes on investments?
A
Since investments are considered unearned income, taxes do not have to be paid on earnings.
B
Taxes are always paid on investments either when the money is placed in the investment or removed from the investment.
C
Taxes only have to be paid on employer-sponsored investment accounts.
D
Taxes are often owed on profits generated from investments
*select an answer for all questions
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