Personal Finance 5.01 and 5.02

Which statement is the most correct description of liquidity?

• How quickly & easily an asset can be converted into cash.

• The amount of savings available.

• A measurement of how much a person/household owns once all debts have been paid.

• The amount of money needed to pay for the necessities & comforts currently enjoyed.

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

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

• Invest as long as possible & 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.

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 the total return on investment.

Tags

CCSS.HSF-IF.C.8B

Which of the following statements would best show you understand compounding interest?

• It is interest earned on the principal investment.

• It is any form of interest earned from saving or investing.

• It is earning interest on interest.

• It is the effect interest has on the total return on investment.

When a goal has been set to save $100.00 a month for an emergency fund of $2000.00, giving up food from the vending machine to achieve the goal is the:

• opportunity cost

• interest

• specific part of the SMART goal

• trade-off

This is a type of account at a depository institution that is used for a fixed period of time & allows the most restricted access to the funds deposited is a

• savings account

• certificate of deposit

• money market account

• tiered account

Accounts offered by depository institutions whose main purpose is to help people manage their money are

• savings tools.

• deposit tools.

• money market tools.

• certificate of deposit.

An account that allows quick access to funds for transactions are

• savings accounts.

• money market accounts.

• checking accounts.

• certificate of deposit.

An account that is designed to hold money not spent on current consumption is a

• checking account.

• savings account.

• certificate of deposit.

• money market account.

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.