SavingandInvestingUnitMultipleChoiceTestBank
Name
Date
Class
Directions:Circlethecorrectanswerforeachquestion.(1pointeach)
ChoosetoSave
1.Kylee’sPersonalFinanceclassWhenhasbeendiscussingtheimportance ofunderstandingliquidityandsheistryingtoexplainthetermtoanotherstudent.Whichstatementismostcorrectdescriptionofliquidity?
a.howquicklyandeasilyanassetcanbeconvertedintocash
b.theamountofsavingsavailable
c.ameasurementofhowmuchapersonorhouseholdownsoncealldebtshavebeen
paid
d.theamountofmoneyneededtopayforthenecessitiesandcomfortscurrentlyenjoyed
2.Whentakingadvantageofthetimevalueofmoney,whichofthefollowingismostlikelyto resultinthelargestreturn?
a.Investalargeprincipalamountofmoneyandthenmakenoadditionalinvestments.
b.Investaslongaspossibleandatthehighestinterestratepossible.
c.Investasmallamountofmoneyforashortperiodoftimeatthehighestinterestratepossible.
d.Investatahighinterestratebecauseinterestistheonlyfactorthataffectsreturn.
3.Compoundinterestisbestdefinedas:
a.Interestearnedontheprincipalinvestment
b.Anyformofinterestearnedfromsavingorinvesting
c.Earninginterestoninterest
d.Theeffectinteresthasonthetotalreturnoninvestment
4.Dylanispreparingapresentationaboutsavingandthepresentationrubricsaysthathemustincludeanexplanationofcompoundinginterest.Whichofthefollowingstatementswould bethebestonetoincludeinhispresentationtoshowthatheunderstandscompounding interest?
a.interestearnedontheprincipalinvestment
b.anyformofinterestearnedfromsavingorinvesting
c.earninginterestoninterest
d.theeffectinteresthasonthetotalreturnoninvestment
5.Whenagoalhasbeensettosave$100.00amonthforanemergencyfundof$2000.00,givingupfoodfromthevendingmachinetoachievethatgoalisthe:
a.opportunitycost
b.interest
c.specificpartoftheSMARTgoal
d.trade‐off
6.Whichstatementbestreflectsthephilosophyof“payyourselffirst”?
a.Anindividualshouldsavewhatevermoneyisleftoverafterpayingmonthlybills.
b.Anindividualshouldpayallfixedexpensesbeforepayingflexibleexpenses.
c.Anindividualshouldsetasideapredeterminedamountofmoneyforsavingbeforeusinganyofthatmoneyforspending.
d.Anindividualshouldspendmoneyontheitemsandactivitiesenjoyedinlifebeforepayinganyotherexpenses
SavingsTools
7.Inrelation totheotheroptions,howliquidisasavingsaccount?
a.Moreliquidthancash
b.Lessliquid thanmutualfunds
c.MoreliquidthanaCertificateofDeposit
d.Moreliquidthanacheckingaccount
8.Hannahneedsasavingstooltohelphermanagehereverydaypurchases.Thesavingstool needstobeveryliquidandaccessible.Whichof thefollowingsavingstoolsshouldHannah choose?
a.Certificateofdeposit
b.Checkingaccount
c.Moneymarketdepositaccount
d.AnyoftheabovesavingstoolswouldhelpHannah
9.Whichofthefollowingstatementscorrectlydescribesthesecuritylevelofsavingstools?
a.Savingstoolsarenotsecurebecausetheyhaveahighriskoflosingmoney.
b.SavingstoolsaresecurebecausetheyareprotectedbytheU.S.governmentagainstloss.
c.Savingstoolsareverysecurebecausetherearenotrisksinvolvedwithsavingorinvesting.
d.Noneoftheaboveistrue.Itwouldbesafertokeepthemoneyathomeinashoebox.
10.Brettplanstosavemoneytowardpurchasingacar.Hisco‐workeristellinghimaboutaMoneyMarketAccounthehasthatoffersatieredinterestrate.WhatisBrett’sco‐workertalkingabout?
a.Theamountofmoneyheearnsdependsonthebalance,i.e.thehighertheaccountbalancethe highertheinterestratehewouldearn.
b.Theamountofmoneyheearnsdependsonthenumberofaccountshehasatthe
depositoryinstitution,i.e.themoreaccountshehas,thehigherinterestratehewillearn.
c.Brett’sco‐workeristalkingaboutsomethingthatisillegal.Atieredaccountispromotedbyscamartistswhotrickpeopleintoinvestingmoneyinhopesofearninghigherratesovertime.
d.Therateofinterestearnedincreasesovertime,i.e.leavingmoneyintheaccountfor3
monthswouldearnalowerinterestratethanleavingmoneyintheaccountfor12months.
11.Whichofthefollowingisafeatureofacertificateofdeposit(CD)?
a.FundsdepositedinaCDareheldforacertainlengthoftime.
b.FundsdepositedinaCDhavetieredinterestrates.
c.FundsdepositedinaCDareveryliquid.
d.FundsdepositedinaCDcanbeaccessedviacheckordebitcard.
12.Whichofthefollowingisafeatureofamoneymarketdepositaccount?
a.Nominimumbalancerequirements
b.Unlimitedtransactionseverymonth
c.Tieredinterestrates
d.Themoneymustremainintheaccountforaspecificperiodoftime
TheFundamentalsofInvesting
13.Harrisisconcernedabouttheeffectsofinflationonhisinvestmentreturns.Whichstatementbestdescribesinflation?
a.Theriseinthegenerallevelofprices
b.Theuncertaintyaboutthereturnonaninvestment
c.Thenumberoftimessomethinghappenstomoney
d.Theprojectedvalueofaninvestmentattheendofaspecifiedtimeframe
14.Themostcommonrelationshipbetweenriskandreturnininvestingcanbestatedas:
a.higherriskindicateslowerreturn
b.higherriskindicateshigherreturn
c.lowerriskindicateshigherreturn
d.Norelationshipexistsbetweenriskandreturn
15.Elliot’sstockbrokerissuggestingthatheconsiderinvestinginadiversifiedportfolio.Adiversifiedportfolioisdesirablebecauseit:
a.increasestherisk/returnratio
b.limitsinvestorschoicestoonlyoneortwoinvestmenttools
c.indicatesaninvestorisagoodpredictorofthereturnaninvestmentwillhave
d.decreasesriskbyinvestingmoneyinavarietyofinvestmenttools
16.Whichofthefollowingisnottrueinregardstoinvestinginstock?
a.Astockholderownsapartofacompany.
b.Dependinguponthecurrentmarketprice,stockholdersmaypaydifferentpricesforthesamestock.
c.Astockholdermayormaynotreceiveadividend.
d.Astockholderwillalwaysreceiveaprofitwhenthestockissold.
17.Connerwantstopurchasestockswiththemoneyhereceivedfromhistaxreturn.Whowouldhecontacttomakethetransaction?
a.Abrokeragefirm
b.TheNewYorkStockExchange
c.Arealestateagent
d.Connershouldcompletethistransactiononhisown
18.WhichstatementisTRUEofmutualfunds?
a.MututalFundsarespeculativeinvestments
b.MutualFundsarediversifiedinvestments
c.MutualFundsareaformofrealestateinvestment
d.Mutualfundsaresuperiorpurhcasingtoasinglestock
19.Abondis:
a.Atypeofdebtthatacompanyissuestoinvestorsforaspecifiedperiodoftime.
b.Ashareofownershipinacompany.
c.Atypeofinvestmentthatisonlyofferedbydepositoryinstitutions.
d.Atypeofinvestmentthathasthepotentialforsignificantfluctuationsoverashortperiodoftime.
20.Alisaislookingforaninvestmentthatisstructuredtohavetaxbenefits.Sheshouldlookforinformationon:
a.Taxratedbonds
b.Speculativeinvestments
c.Indexfunds
d.Tax‐advantagedinvestements
21.Itis best tohavetherateofreturnonaninvestmentthantherateofinflation.
a.Lower,inordertominimzetaxes
b.Lower,inorderotminimizerisk
c.Higher,tomaintainpurchasingpower
d.Higher,tominimizerisk
22.Whichofthefollowingstatementsistrueinregardstopayingtaxesoninvestments?
a.Sinceinvestmentsareconsideredunearnedincome,taxesdonothavetobepaidonearnings.
b.Taxesareoftenowedonprofitsgeneratedfrominvestments.
c.Taxesonlyhavetobepaidonemployer‐sponsoredinvestmentaccounts.
d.Taxesarealwayspaidoninvestmentseitherwhenthemoneyisplacedintheinvestmentor
removedfromtheinvestment.