Personal Finance Review Part 5

When taking advantage of the time value of money, which is most likely to result in the largest return?

• Invest a large principal amount of money and then make no additional investments.
• Invest 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.

Which 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.

Which 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.

Hannah needs a savings tool to help her manage her everyday purchases. The savings tool needs to be very liquid and accessible. Which savings tool should Hannah choose?

• Certificate of deposit
• Checking account
• Money market deposit account
• Any of the above savings tools

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

• More liquid than cash
• Less liquid than mutual funds
• More liquid than a certificate of deposit
• More liquid than a checking account

Brett plans to save money toward purchasing a car. His coworker is telling him about a money market account he has that offers a tiered interest rate. What is Brett’s coworker 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 coworker 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.

Which is a feature of a money market deposit account?

• No minimum balance requirements
• Unlimited transactions every month
• Tiered interest rates
• The money must remain in the account for a specific period of time

Alisa is looking for an investment that is structured to have tax benefits. She should look for information on:

• tax-rated bonds
• speculative investments
• index funds.
• tax-advantaged investments.

Which is not true with regard 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.

Conner wants to purchase stocks with the money he received from his tax return. Who would he contact to make the transaction?

• A brokerage firm
• The New York Stock Exchange
• A real estate agent
• Conner should complete this transaction on his own.