Test 5 Review Guide

Which of the following are U.S. savings bonds?

• CDs

• I Bonds

• Apple Stock

• EE Bonds

Mutual funds help spread out the risk of investing by

• investing in a variety of stocks and bonds.

• putting your money only in savings accounts.

• buying many shares of a single company.

• investing only with a financial advisor.

Answer explanation

Mutual funds generally include a variety of securities, including stocks and bonds. Even if one security fails, you're protected by having invested in many different companies.

What type of investment typically offers the most reward, but also the great risk?

• Corporate Bonds

• Certificates of Deposit

• Savings Accounts

• Corporate Stock

What type of U. S. Savings bond is guaranteed to double after 20 years?

• I Bond

• D Bond

• S Bond

• EE Bond

Getting something now with a promise of repaying it later is using

• collateral

• capacity

• credit

• a down payment

Answer explanation

Credit is "the advance of money with a promise to repay at a later date".

What type of U.S. Savings Bond is tied to inflation?

• D Bonds

• I Bonds

• EE Bonds

• S Bonds

Which offers the least amount of liquidity?

• Savings account

• NOW account

• Certificate of Deposit

• Money Market Fund

Answer explanation

CDs cannot be accessed for a set amount of time. E.g., an 18-month CD can't be accessed for 18 months. On the other hand, savings and checking account funds can be accessed pretty much immediately. Mutual funds are generally not quite as liquid as savings and checking funds.

A poor credit rating can result in which of the following?

• Inability to obtain loans

• Higher interest rates on loans

• Lower interest rates on loans

• Requirements of Collateral for loans

Answer explanation

Poor credit ratings can have numerous negative impacts on consumers who seek loans including higher interest rates (more cost), refusal of loans, and the demand that borrowers put up items of value as collateral in order to borrow.

Missing loan payments can hurt your credit rating. Credit rating is related to which of the three "Cs"?

• Capacity

• Collateral

• Character

• Casserole

Answer explanation

Character includes your credit history. How well you've kept up with your bills will determine your credit rating.

Why is buying on credit not always a good thing?

• It helps people deal with emergencies.

• It lets people buy things without carrying around a lot of money.

• It encourages people to buy things they can't really afford.

• It can create a credit history for consumers.

Answer explanation

People sometimes don't see the impact of their spending until well after the purchases. Over time, excessive spending can create stress and loss of property.