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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 have tiered interest rates.
C
Funds deposited in a CD are held for a certain length of time.
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 a certificate of deposit
B
More liquid than a checking account
C
More liquid than cash
D
Less liquid than mutual funds
3) Which savings tool is the most liquid?
A
Certificate of deposit
B
Any of the above savings tools
C
Money market deposit account
D
Checking account
4) Which is a feature of a money market deposit account?
A
Tiered interest rates
B
Unlimited transactions every month
C
No minimum balance requirements
D
The money must remain in the account for a specific period of time
5) Which correctly describes the security level of savings tools?
A
Savings tools are not secure because they have a high risk of losing money
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 secure because they are protected by the U.S. government against loss.
6) Which best describes a tiered Money Market account?
A
The rate of interest earned increases over time
B
The amount of money he earns depends on the balance, i.e. the higher the account balance the higher the interest rate he woul
C
The amount of money he earns depends on the number of accounts he has at the depository institution
D
A tiered account is promoted by scam artists who trick people into investing money
7) Who would a person contact to invest money in the stock market?
A
A real estate agent
B
The New York Stock Exchange
C
A brokerage firm
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
higher risk indicates higher return
C
lower risk indicates higher return
D
higher risk indicates lower 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 owns a part of a company
B
A stockholder will always receive a profit when the stock is sold.
C
A stockholder may or may not receive a dividend
D
Depending upon the current market price, stockholders may pay different prices for the same stock
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
higher, to maintain purchasing power
C
lower, in order to minimze taxes
D
lower, in order to minimize risk
12) Which statement best describes inflation?
A
The number of times something happens to money
B
The uncertainty about the return on an investment
C
The projected value of an investment at the end of a specified time frame
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
indicates an investor is a good predictor of the return an investment will have.
B
decreases risk by investing money in a variety of investment tools
C
increases the risk/return ratio
D
limits investor choices to only one or two investment tools
14) A bond is
A
a type of debt that a company issues to investors for a specified period of time.
B
a share of ownership in a company
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
tax-rated bonds
B
index funds
C
speculative investments.
D
tax-advantaged investments
16) Which statement is true with regard to paying taxes on investments?
A
Taxes only have to be paid on employer-sponsored investment accounts.
B
Since investments are considered unearned income, taxes do not have to be paid on earnings.
C
Taxes are always paid on investments either when the money is placed in the investment or removed from the investment.
D
Taxes are often owed on profits generated from investments
*select an answer for all questions
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