Personal Finance Semester Exam

Why is diversification important in an investment portfolio?

• It reduces the risk of being invested in a single asset or asset class.

• The greater the number of investments the greater the return on investment.

• It results in a greater percentage of tax-advantaged investments.

• It reduces the expense of owning a variety of investments.

Which is the most common investment choice for 401(k) plans?

• Variable annuities

• Individual bonds

• Mutual funds

• Savings bonds

Which is the best definition of investing?

• putting aside money for a future purchase

• putting aside money for a “rainy day”

• putting aside money to make more money

• putting aside money for an emergency

Which is a drawback of being a salaried employee?

• Pay amounts vary from week to week making budgeting difficult.

• Fringe benefits such as health insurance are rarely provided.

• Work weeks might exceed 40 hours without additional pay.

• Employers may reduce the rate of pay without notice.

Which benefit typically costs an employer the most to provide?

• comprehensive health insurance

• one week paid vacation

• $50,000 term life insurance

• four paid sick day

In which situation would an employer be required to pay overtime?

• An hourly employee works a 12 hour shift.

• A salaried employee works on a Saturday.

• An hourly employee works 40 hours in one week.

• A salaried employee works on a federal holiday.

The purpose of advertising is to:

• Tease the consumer

• Inform the consumer

• Persuade the consumer

• All of the above

Which of the following is not a common marketing strategy?

• Providing financing options

• Repetition

• Making the customer do product research

• Personal selling

When a company places an ad and offers no interest on your purchase for three years:

• They are not interested in making a profit

• They are showing their appreciation to you by giving you free money

• The cost of the financing is built into the price of the item

• All of the above

When should a consumer file a fraud alert with the credit bureaus?

• Any time they suspect they have been a victim of identity theft.

• Only if the identity theft involved credit cards or loan accounts.

• If a resulting investigation showed the theft actually took place.

• If the Consumer Financial Protection Bureau recommends it.