Personal Finance (Unit 5 - Part 1) Question Preview (ID: 42036)


Unit 5. TEACHERS: click here for quick copy question ID numbers.

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) limits investor choices to only one or two investment tools.
c) increases the risk/return ratio.
d) decreases risk by investing money in a variety of investment tools.

When taking advantage of the time value of money, which is most likely to result in the largest return?
a) Invest a large principal amount of money and then make no additional investments.
b) Invest at a high interest rate because interest is the only factor that affects return.
c) Invest as long as possible and at the highest interest rate possible.
d) Invest a small amount of money for a short period of time at the highest interest rate possible.

Which correctly describes the security level of savings tools?
a) Savings tools are very secure because there are not risks involved with saving or investing.
b) None of the above is true. It would be safer to keep the money at home in a shoe box.
c) Savings tools are secure because they are protected by the U.S. government against loss.
d) Savings tools are not secure because they have a high risk of losing money.

Which is a feature of a certificate of deposit (CD)?
a) Funds deposited in a CD have tiered interest rates.
b) Funds deposited in a CD can be accessed via check or debit card.
c) Funds deposited in a CD are very liquid
d) Funds deposited in a CD are held for a certain length of time.

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) The amount of savings available
b) A measurement of how much a person or household owns once all debts have been paid
c) How quickly and easily an asset can be converted into cash
d) The amount of money needed to pay for the necessities and comforts currently enjoyed

The most common relationship between risk and return in investing can be stated as:
a) higher risk indicates lower return.
b) higher risk indicates higher return.
c) no relationship exists between risk and return.
d) lower risk indicates higher return.

Which statement best reflects the philosophy of “pay yourself first”?
a) An individual should set aside a predetermined amount of money for saving before using any of that money for spending.
b) An individual should spend money on the items and activities enjoyed in life before paying any other expenses.
c) An individual should save whatever money is left over after paying monthly bills.
d) An individual should pay all fixed expenses before paying flexible expenses.

Compound interest is best defined as:
a) interest earned on the principal investment.
b) any form of interest earned from saving or investing.
c) earning interest on interest.
d) the effect interest has on the total return on investment

A bond is:
a) a share of ownership in a company.
b) a type of investment that has the potential for significant fluctuations over a short period of time.
c) a type of debt that a company issues to investors for a specified period of time.
d) a type of investment that is only offered by depository institutions.

Conner wants to purchase stocks with the money he received from his tax return. Who would he contact to make the transaction?
a) A real estate agent
b) A brokerage firm
c) Conner should complete this transaction on his own.
d) The New York Stock Exchange

Dylan is preparing a presentation about saving and the presentation rubric says that he must include an explanation of compounding interest. Which concept would be the best one to include in his presentation to show that he understands compounding in
a) Earning interest on interest
b) Any form of interest earned from saving or investing
c) The effect interest has on the total return on investment
d) Interest earned on the principal investment

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