PFL Unit 4 Review

Why is it advantageous to start investing early?

• Interest compounds over time.

• Investments are risk-free.

• Early investments are tax-free.

• Investing early guarantees higher returns.

An individual wants to save $1000 for a vacation in the next six months. Criteria for the account: - No risk, FDIC insured - Funds are accessible at any time - Low fees - No required minimum balance Which savings option would BEST meet these criteria?

• A money market mutual fund

• A certificate of deposit

• A bank savings account

• A money market savings account

What is one of the main benefits of investing in bonds?

• Bonds offer higher returns compared to stocks.

• Bonds provide a fixed interest income.

• Bonds are exempt from all taxes.

• Bonds have no risk of default.

What is the most effective way to save money for a car purchase within the next two years?

• Investing in stocks with high potential returns

• Opening a high-yield savings account and making regular deposits

• Using a credit card to cover the cost of the car

• Leasing a car instead of buying one

What is an important financial step to take before purchasing your first home?

• Look for homes in your desired neighborhood

• Determine your budget and get pre-approved for a mortgage

• Start packing your belongings

• Hire a real estate agent

What is a key benefit of investing in the stock market for long-term financial goals?

• Stocks offer the potential for higher returns over the long term compared to other investment options.

• Stocks are risk-free and provide guaranteed returns.

• Stocks are the only investment that can outperform inflation.

• Stocks are less volatile than real estate investments.

Tina's bakery is thriving, but she wants to ensure her business is protected against unforeseen events. Which risk management strategy should she implement?

• Invest in a diversified stock portfolio

• Purchase comprehensive business insurance

• Take out a line of credit for emergencies

• Partner with another local business

A patient visited the hospital for a minor surgery. Despite having health insurance, the patient paid $200 at the time of treatment. A month later, the patient received a bill of $5,000 in medical expenses but was responsible for paying $1,000 of the total. Which BEST describes the co-pay structure of the patient’s medical insurance?

• The patient pays 20% of the co-pay represented by the $1,000 paid after service.

• The patient pays a co-pay of $200 which is paid at the time of service.

• The patient has $4,000 remaining to meet the co-pay requirement.

• The patient pays 4% co-pay because the amount of money paid upon leaving was 4% of the total bill.

A 40-year-old individual in good health is considering buying a $500,000 life insurance policy. He is married and has two children. He can purchase a 20-year term life insurance policy for $44 a month or a whole life insurance policy for $250 a month. What is the benefit of paying a higher premium for the whole life insurance policy?

• It offers a lower cost over the duration of the life insurance policy.

• It provides more flexible premiums over time.

• The holder can borrow or withdraw from the cash value of the policy.

• The holder is guaranteed a fixed death benefit regardless of loans taken out against the policy

A student frequently uses public computers at the library to complete school assignments and access personal accounts. What is a good practice to ensure the student's information remains secure?

• Log out of all accounts and clear the browser history after each session

• Ignore software update notifications and continue using the computer

• Share passwords with friends to ensure account recovery

• Disable the firewall to speed up the internet connection