Unit 1: Saving vs Investing Content (and some math) Practice Qs

What is the primary purpose of an emergency fund?

• Funding a vacation

• Buying stocks

• Covering unexpected expenses

• Saving for a car

Which term means treating savings as a non-negotiable "expense"?

• Compounding

• Liquidation

• Diversification

• "Pay Yourself First" (PYF)

Which of the following savings vehicles is primarily for day-to-day transactions?

• Money Market Account

• Certificate of Deposit

• Checking Account

• Mutual Fund

The principal in most savings vehicles is __________.

• At high risk

• Not exposed to external / market fluctuations

• Always increasing

• Dependent on stock performance

What is a major concern with the returns from most savings vehicles in relation to inflation?

• Returns always outpace inflation

• Returns are always equal to inflation

• Returns may not always outpace inflation

• Returns are not affected by inflation

Which investment is a debt security where you essentially loan money to the issuer?

• Stocks

• Real Estate

• Commodities

• Bonds

What is the primary purpose of diversification in an investment portfolio?

• Increase returns

• Reduce risk

• Ensure liquidity

• Focus on one sector

In the Relative Risk Pyramid, where would you place savings accounts?

• Base (lowest risk)

• Middle (moderate risk)

• Top (highest risk)

• Outside the pyramid

Which investment vehicle issues dividends?

• Real Estate

• Derivatives

• Stocks

• Commodities

What do ETFs and mutual funds have in common?

• Both are debt securities

• Both represent a basket of securities

• Both have very high management fees

• Both involve savings vehicles