PFL 2nd Semester Exam - 5, 6, 10, 11, 12, 13, 14

Which of the following is TRUE? [PFL#5]

• Savings and investing is only for wealthy people.
• Savings and investing is important for people of all income levels.
• Savings is only for people with limited income and investing is for people with high levels of income.
• Savings is only for people with high levels of income and investing is for people with limited income.

Inflation refers to [PFL#5]

• an overall increase in prices.
• how quickly your money can double.
• the amount of money earned by investing.
• the level of risk associated with equity investing.

Stocks and bonds are similar in that both [PFL#5]

• have a guaranteed rate of return.
• have relatively high levels of risk.
• provide ownership in a business.
• are tied to the rate of inflation.

If you are planning to put aside money for long-term goals, your BEST option is probably [PFL#5]

• keeping your money in a jar by the bed because banks are not safe.
• putting your money in a savings account because it is insured.
• putting your money into a mutual fund because it is diversified.
• buying stock only in the company where you work.

Liquidity is defined as [PFL#5]

• how easy it is to turn an item into cash without losing any money.
• how easy it is to lose money when you invest in a risky business.
• the ability of savings to earn interest.
• the potential loss from rising prices.

Deciding whether to save $25 or buy a pair of shoes illustrates [PFL#5]

• risk.
• opportunity cost.
• budgeting.
• denial of benefits.

Compound interest is calculated as [PFL#5]

• principal plus any interest they have already paid you.
• principal minus the amount you are paid annually.
• principal but not on the interest earned.
• prorated interest over the life of an investment.

Which one of the following events could make your retirement benefit LESS than expected? [PFL#6]

• Inflation occurs at a lower rate than you calculated.
• Your rate of return is slower than you had calculated.
• You earn a larger retirement benefit than you had calculated.
• You inherit money you had not anticipated.

Life expectancy refers to [PFL#6]

• your perception of how long you expect to live.
• an estimate of how much money you need for retirement.
• a statistical estimate of the number of years you will live in retirement.
• a statistical measure of the average life span of a specific population.

As a young person, saving for your retirement is an example of a _____ goal [PFL#6]

• short-term
• value-added
• medium-term
• long-term