Chapter 8 Personal Finance

Two ways people can save money with little risk include

• buying stock and buying certificates of deposits

• having a savings account and buying certificates of deposits.

• contributing to a pension fund and buy stock.

• contributing to a finance company and buying certificates of deposit.

Which of the following are long term US. government securities issued by the government when it borrows money?

• Treasury Bonds

• corporate bonds

• mutual funds

• stock broker investments

When shopping for a credit card, look for one with a low ________, which is how much your credit will cost.

• grace period

• Credit Bureau

• Interest rate, APR

• Collateral

What us the best method for building a good credit history?

• Pay only the minimum payment on your credit card for the first year.

• Only use your debit card, never use your credit card.

• Arrange for all your bills to be automatically charged to your credit card.

• Pay all credit card bills on time every month.

How does saving and investing promote economic growth in an economy?

• Saving and investing leads to a decline in nominal GDP

• Saving and investing makes funds available for businesses to use to expand and grow

• Foreign investments will decrease when saving and investing increases

• Saving and investing increases protectionism, causing the economy to grow

Which of the following investments has the highest risk?

• mutual funds

• Treasury Bonds

• Certificates of Deposit (CD)

• stocks

How does the investment risk of a bond compare with that of a stock purchase?

• Stocks have more risk, but earn a guaranteed rate of return.

• Bonds have less risk and earn a fixed interest rate.

• Bonds have more risk and earn a fixed return in the form of dividends.

• The risk of both is about the same.

Which of the following statements about credit cards use is NOT accurate?

• Credit cards cause people to get into debt and should never be used.

• It's okay to use a credit card if you have a plan to pay off the balance as soon as possible.

• Credit card use is acceptable if you save money on a purchase, even paying the finance charges.

• Paying your balance before the finance charges are due is preferred use of credit card.

Which of the following is a reason to diversify your investments?

• to get the lowest possible return

• to eliminate return

• to get the most dividends

• to reduce risk

What is a mutual fund?

• a device for pooling the savings of many investors and investing it in a variety of ways

• a group that makes loans to investors who sometimes have a history of not paying back their loans.

• a group that borrows money from many different sources to lend to its members

• a company that collects money from people to insure their families against their loss of income.