PF Unit 5

Which statement best describes liquidity?

• How quickly and easily an asset can be turned into cash
• The amount of savings available
• How much a person owns once all debts have been paid
• The amount of money needed to pay for wants and needs

When taking advantage of the time value of money, which would result in the largest return?

• Invest a large amount and then make no additional investments
• Invest as long as possible at the highest interest rate
• Invest a small amount for a short time at the highest interest rate
• Invest at a high interest rate since interest is the only factor affecting return

Compound interest is best defined as:

• Interest earned on the principal investment
• Any form of interest earned from saving or investing
• Earning interest on interest
• The effect interest has on total return

When you are saving toward a specific goal, giving up snack food to achieve the goal is the:

• Opportunity Cost
• Interest
• Specific part of SMART goal
• Trade-off

Which statement best reflects the philosophy of "Pay Yourself First"?

• Save whatever money is left after paying all bills
• Pay all fixed expenses before paying flexible expenses
• Save before using any money for spending
• Spend money on entertainment before paying any other expenses

In relation to all other savings tools, how liquid is a savings account?

• More liquid than cash
• Less liquid than mutual funds
• More liquid than a CD
• More liquid than a checking account

Which savings tool is very liquid and easily accessible?

• CD
• Checking Account
• Money Market Account
• Any of the above

Regarding a Money Market Account, which of these answers explains a tiered interest rate?

• The higher the account balance, the higher the interest rate
• Amount earned depends on the # of accounts you have
• It is something illegal
• The rate of interest earned increases over time

Which of the following is a feature of a Certificate of Deposit (CD)?

• Funds are held for a certain length of time
• Funds have tiered interest rates
• Funds in CD's are very liquid
• Funds can be accessed by a check or debit card

Which of the following is a feature of a money market account?

• No minimum balance
• Unlimited transactions every month
• Tiered interest rates
• Funds must remain on account for a specific period of time