Savings and Investing

Define liquidity.

• Businesses that provide financial services

• Insured if the account is within coverage limits

• How quickly and easily an asset can be converted into cash

Which account is the least liquid?

• Checking Account

• Savings Account

• Money Market Deposit Account

• Certificate of Deposit

Savings accounts are considered high risk!

• True

• False

Because they are FDIC and NCUA insured, CDs have _______ risk on your first $250,000.

• High

• No

• Minimal

• Opportune

Which money market account would earn a higher interest rate?

• One with $25,000

• One with $10,000

Which investment might have more hidden costs than others?

• stocks

• mutual funds

• retirement accounts

• bonds

Select the correct answer.

Why is investing in a mutual fund less risky than investing in a particular company’s stock?

• Mutual funds only invest in blue-chip stocks.

• Investments in mutual funds are more liquid.

• Investments in mutual funds offer a higher rate of return.

• Mutual funds hold a diversified portfolio of stocks.

Select the correct answer.

How does inflation affect investments?

• It increases the market price of investments.

• It creates a negative market psychology and decreases asset prices.

• It makes investments less liquid.

• It reduces the monetary value of the rate of return.

The possibility of losing all or part of your investment is known as

• asset allocation

• compounding

• return

• risk

Generally, how is risk related to return?

• the lower the risk, the greater the possibility of a high return

• the greater the risk, the greater the possibility of a high return

• the greater the risk, the greater the possibility of a low return

• risk and return have no relationship