Savings & Investing Review

What is liquidity?

• how quickly and easily an asset can be converted into cash
• the amount of savings available
• a measurement of how much a person or household owns once all debts have been paid
• the amount of money needed to pay for the necessities and comforts currently enjoyed

What factors play the biggest role in maximizing your return on investment/saving?

• 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.

What is compound interest?

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

Giving up one thing for another is a ...

• opportunity cost
• interest
• specific part of the SMART goal
• trade‐off

What is "pay yourself first"?

• An individual should save whatever money is left over after paying monthly bills
• An individual should pay all fixed expenses before paying flexible expenses
• An 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

In relation to the 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

What savings tool would you use to make every day purchases??

• Certificate of deposit
• checking account
• Money market deposit account
• Any of the above savings tools would help Hannah

Which 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.  

What is tiered interest?

• 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.

Which 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.