Financial Literacy Test (Chp #11-13)

Avoiding risk altogether is the best way to manage finances effectively.

• True

• False

1. CDs with a five year term have lower liquidity compared to a three month term.

• True

• False

If you buy a stock for $20 and sell it for $30, what is your return?

• $25

• $75

• $10

• $5

If a loaf of bread costs $2 today and costs $4 five years from now, what has occurred?

• Inflation has occurred.
• The price of bread has decreased.
• The cost of living has stabilized.
• The value of money has increased.

What is the primary benefit of using a financial advisor?

• Increased risk of financial loss.
• Higher fees for basic services.
• Expert guidance on financial management.
• Limited access to investment opportunities.

What is inflation?

• Inflation is the decrease in prices and increase in the purchasing value of money.
• Inflation refers to the total amount of money in circulation without any price changes.
• Inflation is a measure of economic growth and productivity.
• Inflation is the increase in prices and fall in the purchasing value of money.

What does it mean when an investment is "liquid"?

• An investment is 'liquid' when it cannot be sold quickly.
• An investment is 'liquid' when it generates high returns.
• An investment is 'liquid' when it has a high risk of loss.
• An investment is 'liquid' when it can be easily converted to cash.

Which of the following represents an example of a volatile investment?

• Cryptocurrencies
• Real estate
• Government bonds
• Savings accounts

What is a strategy for managing risk?

• Risk management strategy includes risk assessment and mitigation measures.
• Avoiding any form of analysis or planning.
• Investing all resources in one area.
• Ignoring potential threats altogether.

What is a CD?

• A CD is a Certificate of Deposit, a time deposit with a fixed interest rate.
• A CD is a Certificate of Delivery for goods.
• A CD is a Compact Disc used for storing music.
• A CD is a Credit Document for loans.