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- 1. Multiple ChoiceKylee’s Personal Finance class When has been discussing the importance of understanding liquidity and she is trying to explain the term to another student. Which statement is most correct description of liquidity?how quickly and easily an asset can be converted into cashthe amount of savings availablea measurement of how much a person or household owns once all debts have been paidthe amount of money needed to pay for the necessities and comforts currently enjoyed
- 2. Multiple ChoiceWhen taking advantage of the time value of money, which of the following is most likely to result in the largest return?Invest a large principal amount of money and then make no additional investmentsInvest as long as possible and at the highest interest rate possible.Invest a small amount of money for a short period of time at the highest interest rate possible.Invest at a high interest rate because interest is the only factor that affects return.
- 3. Multiple ChoiceCompound interest is best defined as:Interest earned on the principal investmentAny form of interest earned from saving or investingEarning interest on interestThe effect interest has on the total return on investment
- 4. Multiple ChoiceDylan is preparing a presentation about saving and the presentation rubric says that he must include an explanation of compounding interest. Which of the following statements would be the best one to include in his presentation to show that he understands compounding interest?interest earned on the principal investmentany form of interest earned from saving or investingearning interest on interestthe effect interest has on the total return on investment
- 5. Multiple ChoiceWhen a goal has been set to save $100.00 a month for an emergency fund of $2000.00, giving up food from the vending machine to achieve that goal is the:opportunity costinterestspecific part of the SMART goaltrade‐off
- 6. Multiple ChoiceWhich statement best reflects the philosophy of “pay yourself first”?An individual should save whatever money is left over after paying monthly billsAn individual should pay all fixed expenses before paying flexible expensesAn individual should set aside a predetermined amount of money for saving before using any of that money for spending.An individual should spend money on the items and activities enjoyed in life before paying any other expenses
- 7. Multiple ChoiceIn relation to the other options, how liquid is a savings account?More liquid than cashLess liquid than mutual fundsMore liquid than a Certificate of DepositMore liquid than a checking account
- 8. Multiple ChoiceHannah needs a savings tool to help her manage her everyday purchases. The savings tool needs to be very liquid and accessible. Which of the following savings tools should Hannah choose?Certificate of depositchecking accountMoney market deposit accountAny of the above savings tools would help Hannah
- 9. Multiple ChoiceWhich of the following statements correctly describes the security level of savings tools?Savings tools are not secure because they have a high risk of losing money.Savings tools are secure because they are protected by the U.S. government against loss.Savings tools are very secure because there are not risks involved with saving or investing.None of the above is true. It would be safer to keep the money at home in a shoe box.
- 10. Multiple ChoiceBrett plans to save money toward purchasing a car. His co‐worker is telling him about a Money Market Account he has that offers a tiered interest rate. What is Brett’s co‐worker talking about?The amount of money he earns depends on the balance, i.e. the higher the account balance the higher the interest rate he would earn.The amount of money he earns depends on the number of accounts he has at the depository institution, i.e. the more accounts he has, the higher interest rate he will earn.Brett’s co‐worker is talking about something that is illegal. A tiered account is promoted by scam artists who trick people into investing money in hopes of earning higher rates over time.The rate of interest earned increases over time, i.e. leaving money in the account for 3 months would earn a lower interest rate than leaving money in the account for 12 months.
- 11. Multiple ChoiceWhich of the following is a feature of a certificate of deposit (CD)?Funds deposited in a CD are held for a certain length of time.Funds deposited in a CD have tiered interest rates.Funds deposited in a CD are very liquid.Funds deposited in a CD can be accessed via check or debit card.
- 12. Multiple ChoiceWhich of the following is a feature of a money market deposit account?No minimum balance requirementsUnlimited transactions every monthTiered interest ratesThe money must remain in the account for a specific period of time.
- 13. Multiple ChoiceHarris is concerned about the effects of inflation on his investment returns. Which statement best describes inflation?The rise in the general level of pricesThe uncertainty about the return on an investmentThe number of times something happens to moneyThe projected value of an investment at the end of a specified time frame
- 14. Multiple ChoiceThe most common relationship between risk and return in investing can be stated as:higher risk indicates lower returnhigher risk indicates higher returnlower risk indicates higher returnNo relationship exists between risk and return
- 15. Multiple ChoiceElliot’s stock broker is suggesting that he consider investing in a diversified portfolio. A diversified portfolio is desirable because it:increases the risk/return ratiolimits investors choices to only one or two investment toolsindicates an investor is a good predictor of the return an investment will havedecreases risk by investing money in a variety of investment tools
- 16. Multiple ChoiceWhich of the following is not true in regards to investing in stock?A stockholder owns a part of a company.Depending upon the current market price, stockholders may pay different prices for the same stock.A stockholder may or may not receive a dividend.A stockholder will always receive a profit when the stock is sold.
- 17. Multiple ChoiceConner wants to purchase stocks with the money he received from his tax return. Who would he contact to make the transaction?A brokerage firmThe New York Stock Exchangea real estate agentConner should complete this transaction on his own
- 18. Multiple ChoiceWhich statement is TRUE of mutual funds?Mutual funds are speculative investmentsMutual funds are diversified investmentsMutual funds are a form of real estate investmentMutual funds are superior purchasing to a single stock
- 19. Multiple ChoiceA bond is:A type of debt that a company issues to investors for a specified period of timeA share of ownership in a company.A type of investment that is only offered by depository institutions.A type of investment that has the potential for significant fluctuations over a short period of time.
- 20. Multiple ChoiceAlisa is looking for an investment that is structured to have tax benefits. She should look for information on:Tax rated bondsSpeculative investmentsindex fundsTax-advantaged investments
- 21. Multiple ChoiceIt is best to have the rate of return on an investment than the rate of inflation.Lower, in order to minimize taxesLower, in order to minimize riskHigher, to maintain purchasing powerHigher, to minimize risk
- 22. Multiple Choice
Which of the following statements is true in regards to paying taxes on investments?
Since investments are considered unearned income, taxes do not have to be paid on earnings.
Taxes are often owed on profits generated from investments.
Taxes only have to be paid on employer‐sponsored investment accounts.
Taxes are always paid on investments either when the money is placed in the investment or removed from the investment.
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