Personal Finance 1

Why would someone choose to put money in stocks as opposed to a savings account that earns interest? (Choose the best answer)

• They are guaranteed a return in a savings account
• There is potential to earn more money in the savings account
• They are guaranteed a return in stocks
• There is potential to earn more money in the stock market

Which sentence describes the risk and returns of investing in stocks?

• They offer the lowest risks and the lowest potential returns
• They offer the highest risks and the highest potential 
• They offer the lowest risks, but the highest potential returns
• They offer the highest risks, but the lowest potential returns.

What actions can decrease your credit score?

• Pay your bills on time
• Only check your credit score once a year
• Max out your credit cards
• Pay off your full debt at one time

Which investment offers the highest risk and highest potential returns?

• savings accounts
• stocks
• bonds
• mutual funds

The price you pay to have insurance is called

• the deductible
• a copay
• the policy
• the premium

The BEST example of progressive tax in the US is

• The federal excise tax on gasoline
• The Social Security tax
• The federal personal income tax
• State sales taxes

Who is hurt MOST by unanticipated inflation?

• Savers at a fixed rate of interest
• Borrowers at a fixed rate of interest
• Workers with a union cost-of-living adjustment in their contracts
• speculators in gold and other precious metals

The main difference between a credit union and a commercial bank is that

• Only commercial banks offer checking account services to its members
• Commercial banks make loans, but don't offer checking or savings account services
• Credit unions don't make home and car loans, wheras commercial banks do make home and car loans
• Credit unions are only available to specific customers, but commercial banks are available to everyone

Bob has $25,000 that he would like to invest in a diversified manner. Bob's BEST investment option to accomplish this goal would be to

• Purchase $25,000 worth of a company's stock
• Purchase $25,000 worth of zero coupon bonds
• Purchase $25,000 worth of share in a mutual fund
• Purchase $25,000 worth of US government securities

In order for a bank to have the chance to make a profit, they must

• Charge borrowers a lower interest rate than they charge depositors
• Pay depositors a lower interest rate than they charge borrowers
• Charge borrowers a higher fee than they charge to depositors
• Charge borrowers and depositors the same interest rates