FP.PFL.1

-Your money is combined with money

from other investors to buy a variety

of investments.

-Your money is not insured, but

diversification reduces the risk of

loss.

-You will be charged fees for the

management of the investments.

• Mutual Funds

• Government Bonds

• Certificates of Deposit

• Money Market Accounts

Frank is seventy years old and just retired from his job. His goal is to protect his life savings by placing most of his money in investments with the LEAST risk. In order to achieve his goal, where should he investMOST of his money?

• an individual company’s stock

• high-growth mutual funds

• a brand new company’s bonds

• certificates of deposit

Which banking instrument usually pays the LOWEST interest rate?

• checking account

• savings account

• money market account

• certificate of deposit

Which of these MOST often results from additional education?

• higher income

• higher cost of living

• fewer job opportunities

• fewer developed skills

What is an advantage of using a credit card instead of a debit card?

• lower long-term costs

• the ability to delay payment

• the power to negotiate prices

• more incentives for self-control

A consumer wants to buy a new computer. Although the computer will be more expensive, it will be faster and more efficient than the less expensive model. Which term describes such an economic choice?

• competition

• scarcity

• trade-off

• supply

In order to get spending under control, a person should first

• seek help on investing from a financial planner.

• consult a credit counseling service.

• create a budget of current income and expenses.

• subscribe to financial newsletters and magazines.

Financial planners generally stress the importance of starting to save and invest early because

• a person can stop saving at age 40.

• of the power of compounding and appreciation.

• there are fewer bills to pay when a person is young.

• a person will not need insurance

A person choosing a mortgage usually selects a fixed-rate loan because she knows that

• the interest rate remains the same for the life of the mortgage.

• her income will increase within the next three years.

• the interest rates are going down.

• her homeowners insurance premiums will be lower.

Why does a bank pay interest to a depositor?

• The bank is able to use deposits to earn profits.

• It is a requirement of the Federal Deposit Insurance Corporation (FDIC).

• It helps the bank invest in the local community.

• It is a benefit of having a bank credit card.