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Econ- Chapter 6
Test Description: Investing
Instructions: Answer all questions to get your test result.
1) It is estimated that every year 20 million American investors do what?
A
Use the Internet to make trades.
B
Purchase government savings bonds
C
Invest using over-the-counter markets
D
Purchase stocks through brokers
2) Savings bonds sell for less than their face value because:
A
They pay dividends twice a year.
B
This is how they pay interest
C
Interest is tax-exempt
D
Banks compete to sell them
3) Interest earned on a Roth IRA is:
A
Tax free
B
Taxable up to $2,000 a year
C
Tax deferred
D
Taxable upon retirement
4) Money market deposit accounts:
A
Pay lower interest than savings accounts
B
Allow investors to write checks
C
Are also known as stock funds.
D
Are insured by the FDIC
5) Treasury bonds:
A
Are tax-exempt bonds that fund municipal projects
B
Are good short-term investments
C
Are certificates issued by the U.S. Treasury
D
Pay dividends twice a year
6) A 401(k) earns more than the traditional IRA or Roth IRA because:
A
The company matched the employee's contributions in the 401(k)
B
The investor didn't have to take the money out of the 401(k) until retirement
C
The investor paid no annual tax on the 401(k).
D
All interest earned on the 401(k) was tax-free forever
7) You earn more in retirement plans than you would on basic savings because you would:
A
Invest more each year in the retirement plans
B
Receive a higher rate of return on the retirement plans
C
Invest in the retirement plans for a longer time
D
Pay yearly taxes on savings
8) One disadvantage of investing in real estate is that such an investment:
A
Is not useful when the investor is ready for retirement
B
Causes the investor to have to pay far more in income taxes
C
Cannot easily be turned into cash
D
Does not often increase in value
9) The Dow-Jones Industrial Average is:
A
A mutual fund
B
Traded over-the-counter
C
Another name for the SP 500
D
A stock market index
10) The Federal Deposit Insurance Corporation (FDIC) insures:
A
Commercial bank accounts
B
Credit union accounts
C
Money market accounts
D
Credit union accounts
11) Increase in the value of an asset from the time it was bought to the time it was sold:
A
Capital gain
B
Immediate value
C
Cost-benefit margin
D
Capital loss
12) Decrease in the value of an asset from the time it was bought to the time it was sold:
A
Capital gain
B
Cost-benefit margin
C
Capital loss
D
Immediate value
13) U.S. government securities backed by the Treasury Department with a maturity of one year or less and is exchanged for a minimum amount of $1,000:
A
Treasury bills
B
Treasury notes
C
Treasury bonds
D
Savings bonds
14) U.S. government debt security that is exchanged for a minimum amount of $1,000. It has a fixed interest rate and a maturity between two and 10 years:
A
Treasury bonds
B
Treasury notes
C
Treasury bills
D
Savings bonds
15) Government debt securities issued by the U.S. Federal government and is exchanged for a minimum amount of $1,000. The maturity is greater than 20 years.
A
Treasury bill
B
Savings bonds
C
Treasury notes
D
Treasury bonds
16) Spreading of investments among several different types to lower your overall risk:
A
Rational Choice
B
Profit incentive
C
Diversification
D
Opportunity Cost
17) A person who buys a stock for $20 and sells it for $30 has earned $10 in:
A
Interest
B
Dividends
C
Profit per share
D
Capital gains
18) Compared to a stock, a bond provides a:
A
Lower level of risk
B
Higher level of risk
C
Higher dividend
D
Lower dividend
*select an answer for all questions
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