Personal Finance 5.02-5.03Study Guide Review Question Preview (ID: 47369)


Study Guide Review.

Who would a person contact to invest money in the stock market?
a) A brokerage firm
b) The New York Stock Exchange
c) A real estate agent
d) Conner should complete this transaction on his own

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) The amount of money he earns depends on the number of accounts he has at the depository institution
c) A tiered account is promoted by scam artists who trick people into investing money
d) The rate of interest earned increases over time

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 secure because they are protected by the U.S. government against loss.
c) Savings tools are very secure because there are not risks involved with saving or investing
d) None of the above is true. It would be safer to keep the money at home in a shoe box.

Which savings tool is the most liquid?
a) Certificate of deposit
b) Checking account
c) Money market deposit account
d) Any of the above savings tools

Which is a feature of a money market deposit account?
a) No minimum balance requirements
b) Unlimited transactions every month
c) Tiered interest rates
d) The money must remain in the account for a specific period of time

In relation to other options, how liquid is a savings account?
a) More liquid than cash
b) Less liquid than mutual funds
c) More liquid than a certificate of deposit
d) More liquid than a checking account

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

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) lower risk indicates higher return
d) no relationship exists between risk and return

Which statement is true of mutual funds?
a) Mututal funds are speculative investments
b) Mutual funds are diversified investments
c) Mutual funds are a form of real estate investment
d) Mutual funds are superior purchasing to a single stock

Which is not true with regard to investing in stock?
a) A stockholder owns a part of a company
b) Depending upon the current market price, stockholders may pay different prices for the same stock
c) A stockholder may or may not receive a dividend
d) A stockholder will always receive a profit when the stock is sold.

In relation to the rate of inflation, it is best to have the rate of return on an investment:
a) lower, in order to minimze taxes
b) lower, in order to minimize risk
c) higher, to maintain purchasing power
d) higher, to minimize risk.

Which statement best describes inflation?
a) The rise in the general level of prices
b) The uncertainty about the return on an investment
c) The number of times something happens to money
d) The projected value of an investment at the end of a specified time frame

Elliot’s stock broker is suggesting that he consider investing in a diversified portfolio. A diversified portfolio is desirable because it:
a) increases the risk/return ratio
b) limits investor choices to only one or two investment tools
c) indicates an investor is a good predictor of the return an investment will have.
d) decreases risk by investing money in a variety of investment tools

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 is only offered by depository institutions
d) a type of investment that has the potential for significant fluctuations over a short period of time.

Which is an example investment that is structured to have tax benefits
a) tax-rated bonds
b) speculative investments.
c) index funds
d) tax-advantaged investments

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 often owed on profits generated from investments
c) Taxes only have to be paid on employer-sponsored investment accounts.
d) Taxes are always paid on investments either when the money is placed in the investment or removed from the investment.

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