investing review for test

The most likely way to retire early with enough money to keep your standard of living is to:

• Invest your money early and often when you are young.

• Invest all your money in stocks and bonds before you retire.

• Get a government job. They give full pensions to all their retirees.

• Win the lottery or marry someone who has won the lottery.

What are the benefits if you pay off all your high-interest debt such as credit cards and store cards?

• I'll save a lot of money in interest charges.

• I'll free up money that could be invested.

• I'll lower my debt-to-income ratio.

• All of the above.

Say, your savings account pays 1% interest and inflation is at 0.5%. What's your real rate of return?

• A -0.5%.

• B 0.5%.

• C 1%.

• D 1.5%.

How much will a $1.42 loaf of bread cost in 25 years based on inflation?

• $1.99

• $3.41

• $2.54

• Can't figure because we don't know the inflation rate.

Which answer best defines "opportunity cost"?

• A What it costs to take advantage of a great savings opportunity.

• B The value of the things you have to give up to get something else.

• C The amount you have to pay to do something.

• D The amount a seller paid to sell you a product.

Which of these are examples of opportunity cost?

• A You skip buying new jeans and put the money in your college fund.

• B You deposit your entire paycheck in your investment account instead of cashing it and taking your buddies out to eat.

• C You bring your lunch to your part-time job instead of spending $8 on lunch. You put the $8 in your savings account.

• D All of the above.

"Rate of Return," "Return on Investment," and ROI all mean the same thing. Which answer best describes these terms?

• A ROI is the amount of money returned to you if you ask for it within the first year of investing it.

• B ROI is the amount of profit you receive from your investment, usually measured as a percentage of your investment.

• C ROI is the dollar amount you invest compared to the stock market's fall.

• D ROI will always match the Rule of 72 formula.

How much money will you need for retirement? Which answer is the most correct answer?

• A My social security plus what I have put in a regular savings account will do it.

• B A good guideline is 80% of your working income.

• C Three years income and the 25% I may receive from my company's pension plan.

• D Enough money to last 20 years.

Which choice is the best reason savings accounts are usually NOT the best option when it comes tosaving for retirement?

• A You will not have enough "time horizon" with your saving investments.

• B Time is not on your side when it comes to savings accounts.

• C Most savings accounts do not pay enough interest to keep up with inflation.

• D Many people will spend their savings if they can get to it.

Which of the following is a good example of inflation?

• A You get a raise and the price of gas goes down.

• B You get a second job and you increase your net income by 15%.

• C The price of gas went from $4.00 last month to $4.25 this month.

• D The price of gas goes down from $4.25 last month to $4.00 this month.