Fiancial Literacy Review 3

What is a tool that allows people to save money for future use?

• a debit card

• a dividend

• a savings instrument

• concentrated risk

What is a liquid asset or liquid account?

• when it rains outside the bank

• an account that makes it easy to withdraw and spend funds

• an insurance policy

• an account with extra funds

Opportunity cost is...

• a way to invest money

• a savings instrument

• how much it costs to apply for a new job

• the next-best alternative that you give up when you make a choice

What is NOT an advantage of a statement savings account?

• You earn a lower interest rate than with other savings instruments

• Your money is easy to access

• You can open the account with a low amount of money

• You can withdraw money whenever you want

What is an advantage of a certificate of deposit (CD)?

• Banks pay a lower interest rate on CDs than any other savings instrument

• The interest rate earned is locked in so it won't drop even if regular rates go down.

• A penalty must be paid if funds are withdrawn early

• A large (about $500) is required to open a CD account

What is saving?

• Accumulation of excess funds by intentionally spending less than you make

• Cash set aside to cover the cost of unexpected events

• A monetary asset that contributes to your net worth

• Money available today that is worth more if received in the future

What is emergency savings?

• Transferring money into your savings before you pay your bills

• Original amount of money saved or invested

• Cash set aside to cover the cost of unexpected events

• Maximizing your return by selling stocks at a higher price than what you paid for

When is an item considered an asset?

• While you are making monthly payments on time

• Converting an asset into cash

• When cash is used for emergencies

• When it is fully paid off and can be sold for cash

How much money should you save for emergencies?

• 2 months worth of expenses

• 6 months worth of expenses

• Cash in whatever stocks you have to pay for an emergency

• As a neighbor for a loan if needed

Stocks are:

• A share of ownership in a company

• Organization pays interest to the lender

• Form of lending to a company or the government

• A specified time in the future when the principal amount of the bond is repaid to the bondholder