Unit 3 Practice TEST - Saving, Investing, & Retirement Planning

Vocabulary - Select the correct term.

Purchasing securities such as stocks, bonds, and mutual funds with the goal of increasing wealth over time, but with risk of loss.

• Saving

• Investing

• Liquidity

• Risk

• Opportunity Cost

Vocabulary - Select the correct term.

The quality of an asset that permits it to be converted quickly into cash without loss of value.

• Saving

• Investing

• Liquidity

• Risk

• Opportunity Cost

Vocabulary - Select the correct term.

The value of the 2nd best alternative that a person gives up when making one choice instead of another.

• Saving

• Investing

• Liquidity

• Risk

• Opportunity Cost

Vocabulary - Select the correct term.

A measure of the likelihood of loss or profit on a investment's rate of return.

• Saving

• Investing

• Liquidity

• Risk

• Opportunity Cost

Vocabulary - Select the correct term.

The process of setting income aside for future spending.

• Saving

• Investing

• Liquidity

• Risk

• Opportunity Cost

True or False.

A checking account at your bank is an example of an asset that is highly liquid.

• True

• False

What does "Pay Yourself First" mean?

• Have a certain percentage of your money directly deposited into a savings account before any spending occurs.

• Just go buy whatever you want before paying bills.

• Demand that the boss pays you before anybody else.

• Take all the extra money before your spouse can get it.

Why is it important to "Pay Yourself First"? Read all the options before selecting.

• Having cash flow on hand in case you need it for an emergency.

• To be able to use the money for certain needs and wants without having to use a credit card or apply for a loan.

• Both of these are correct.

• None of these are correct.

The primary distinction between saving and investing is . . .

• Saving = little to no risk / lower reward potential

  Investing = higher risk / higher reward potential

• Saving = higher risk / higher reward potential

  Investing = little to no risk / lower reward potential

• Saving = little to no risk / higher reward potential

  Investing = higher risk / lower reward potential

• Saving = higher risk / lower reward potential

  Investing = lower risk / higher reward potential

What is the "Rule of 72"?

• The average person's life expectancy.

• The estimated amount of time it takes for an investment to double by dividing 72 by the interest rate.

• Any time your principal investment amount is $72.

• Just a fancy terminology founded in 1972 which illustrates the power of simple interest.