Unit 7 Review

 

Wayne is considering opening a savings account or investing in the stock market. He asks you to tell him more about these options. What is the BEST financial information you can share with him?

• In a savings account, money is liquid so you can withdraw it at any time.

• Savings accounts are more likely to double or triple in a short period of time.

• Savings accounts generally earn more money than investing in stocks.

• There are never any fees on savings accounts or investments in stock.

Analisa wants to save her money in a place where she can have access to it anytime in case of an emergency. Which option BEST fits Analisa’s wishes?

• CD

• savings account

• bond

• stocks

What is one TRUE statement about savings accounts?

• Banks cannot legally require you to keep a minimum balance in a savings account.

• Savings accounts always offer the exact same interest rates.

• They will sometimes offer compounding interest rates, which help you make more money.

• Savings accounts can lose up to 10 percent in value every year, making them quite risky.

 

Tom’s investment account at his bank has compounding interest. He isn’t sure if this is a positive thing for his investment. What is the BEST advice you can offer Tom?

• Ask your bank to compound the interest less frequently.

• Withdraw your investment immediately because compounding interest is a scam.

• Invest in a bank that doesn’t offer compounding interest so there is less risk.

• Keep your account open and you will earn more on interest you’ve already earned.

Colleen has kept $10,000 in an account all year. Her bank has paid her $1,000 in dividends on this account. What is her rate of return on this investment?

• 10 percent

• 5 percent

• 20 percent

• 25 percent

At Jeanie’s bank, they calculate the interest she earns daily. Then she earns even more interest off her new account total each day. What is this known as?

• the rate of return

• compounding interest

• speculative investment

• asset allocation

 

Francisco, an older gentleman who is typically very conservative in his approach to money management, thinks he wants to invest some of his money in stocks because he’s heard doing so can generate a good return. What should Francisco know before he begins?

• Stock investments promise a guaranteed return.

• Stock investments rarely generate a better return than savings accounts.

• Stocks are riskier than many other types of investments.

• People are not able to choose which stocks to invest in.

Before you begin investing, what do experts recommend you do?

• Withdraw money from all savings accounts, so you can invest everything.

• Cancel your insurance policies, so you can use that money to invest.

• Borrow money from friends and relatives to maximize your investment cash.

• Set aside an emergency fund to cover any surprise expenses.

 

Barbara is wanting to invest for her retirement. What is NOT something she needs to consider?

• the number of banks in her area

• the relative risk of the investment

• the safety of the investment

• the amount of money she is willing to invest

 

Nelson’s motto is “Go big, or go home.” Which type of investment would Nelson prefer?

• savings account

• speculative investment

• CD

• government bond