Financial Markets Quiz

The difference between savings and investments is that

• savings earn money while investments do not

• investments earn money while savings do not

• savings are investments that are put to use

• investments are savings that are put to use

An institution that helps to bring savers, borrowers, and financial assets together is a

• financial intermediary

• financial market

• primary market

• secondary market

One helpful guideline for investing is that

• the longer you have to invest, the more risk you can take

• the less time you have to invest, the more risk you should take

• you should invest in stocks before paying off credit card debt

• if you have a low income, you must worry about tax liability first

In general, people put money in risky investments because

• they can take a tax deduction if they lose money

• such investments often earn the greatest profits

• no other investments are available at the time

• they receive bad advice from a financial analyst

Stock prices are determined by

• the ruling of the Securities and Exchange Commission

• price fixing by workers at the stock exchanges

• the valuation made by corporate auditors

• the market forces of supply and demand

The interest rate that a bondholder receives every year until the bond matures is called the

• bond rating

• coupon rate

• mature value

• par value

Bonds that are issued by state and local governments are called

• internal bonds

• investment bonds

• junk bonds

• municipal bonds

What is liquidity, and when is it an important consideration in savings?

• Liquidity refers to the ease of converting assets to cash; important for emergencies.

• Liquidity is the interest rate on savings; important for long-term goals.

• Liquidity is the amount of savings; important for short-term goals.

• Liquidity is the value of investments; important for retirement.