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WorksheetsUnit 5 Objective Review
Total questions: 66
Worksheet time: 34mins
What is inflation?
The rise in the general level of prices
The uncertainty the return on an investment will
deviate from what is expected
The number of times something happens to money
The projected value of an investment at the end of a
specified period of time
The relationship between risk and return can be stated as:
Higher risk indicates lower return
Higher risk indicates higher return
Lower risk indicates lower return
No relationship exists between risk and return
A financial plan would not be complete without both savings
and investments
True
False
Investments are more liquid than savings tools.
True
False
With some investments, you may have to wait a long time to
access funds.
True
False
Which has the potential to earn higher returns?
Savings
Investing
The profit or income generated by saving and investing is known as :
debt
inflation
return
risk
What is the percentage (%) of net income that financial experts recommend you commit to saving and investing as part of your spending plan?
10%
15%
20%
8%
When a goal has been set to save $100.00 a month for an emergency fund of $2,000.00, giving up food from the vending machine to achieve that goal is the:
opportunity cost.
interest
specific part of the SMART goal.
trade-off.
Elliot’s stock broker is suggesting that he consider investing in a diversified portfolio. A diversified portfolio is desirable because it:
increases the risk/return ratio.
limits investor choices to only one or two investment tools.
indicates an investor is a good predictor of the return an investment will have.
decreases risk by investing money in a variety of investment tools.
The goal of investing is to
Save for current consumption
Use monies for eating out, going to the movies
Provide for future financial security by building net
worth
Have money at the end of the year to go on a trip
Which type of account is more susceptible to inflation risk?
Mutual fund
Savings account
A bond is a form of lending that can be purchased from
The Federal Government
A state government
A city government
A company
All of the above
Dylan is preparing a presentation about saving and the presentation rubric says that he must include an explanation of compounding interest. Which concept would be the best one to include in his presentation to show that he understands compounding interest?
Interest earned on the principal investment
Earning interest on interest
Any form of interest earned from saving or investing
The effect interest has on the total return on investment
High risk bonds tend to have lower interest rates
true
false
When someone purchases stock in a company, typically they
Own a small percentage of ownership in that company
Owe the government money
Have to sell the stock at a pre‐determined date
Have to pay a dividend back to the company
If a company performs poorly or goes out of business, a
stockholder could lost part of all of their principal investment.
true
false
Real Estate investments are not as time consuming as other
investments
true
false
Stocks are a form of
Owning
Lending
Alisa is looking for an investment that is structured to have tax benefits. She should look for information on:
tax-rated bonds.
speculative investments.
tax-advantaged investments.
index funds.
Adam is concerned about the effects of inflation on his investment returns. Which statement best describes inflation?
The rise in the general level of prices
The uncertainty about the return on an investment
The number of times something happens to money
The projected value of an investment at the end of a specified time frame
Index Funds are a form of
Owning
Lending
Davis wants to purchase stocks with the money he received from his tax return. Who would he contact to make the transaction?
The New York Stock Exchange
A brokerage firm
A real estate agent
Davis should complete this transaction on his own.
The possibility that an investment will fail to pay the expected return or fail to pay a return at all.
Inflation
Inflation Risk
Investment Risk
Risk
Brett plans to save money toward purchasing a car. His coworker is telling him about a money market account he has that offers a tiered interest rate. What is Brett’s coworker talking about?
The amount of money he earns depends on the balance, i.e. the higher the account balance the higher the interest rate he would earn.
The amount of money he earns depends on the number of accounts he has at the depository institution, i.e. the more accounts he has, the higher interest rate he will earn.
Brett’s coworker is talking about something that is illegal. A tiered account is promoted by scam artists who trick people into investing money in hopes of earning higher rates over time.
The rate of interest earned increases over time, i.e. leaving money in the account for 3 months would earn a lower interest rate than leaving money in the account for 12 months.
All of the following are examples of how the purpose of investing is different than the purpose of saving EXCEPT
Investments help to build Net Worth
Investments are assets purchased with a goal of increasing value or providing additional income
Investments are assets that are meant to keep your money in a safe place without the risk of loosing money.
Investments are usually used to pay for long term goals.
Which of the following has the HIGHEST Risk associated?
Bonds
Stock and Real Estate
Speculative
Mutual Funds and Indexes
Which of the following has the LOWEST Risk associated?
Bonds
Stock and Real Estate
Speculative
Mutual Funds and Indexes
True or False: Individuals with an aggressive investment philosophy are not willing to take on risk for the potential of higher returns.
True
False
True or False: Portfolio diversification is a method that helps an individual receive the highest return on investment.
True
False
True or False: A full service general brokerage firm usually charges lower commission fees than a discount broker.
True
False
Which statement is true with regard to paying taxes on investments?
Since investments are considered unearned income, taxes do not have to be paid on earnings.
Taxes are often owed on profits generated from investments.
Taxes only have to be paid on employer-sponsored investment accounts.
Taxes are always paid on investments either when the money is placed in the investment or removed from the investment.
Which account do you usually have to deposit a minimum amount to open the account (typically $1,000)?
Checking Account
Savings Account
Money Market Deposit Account
Certificate of Deposit
Which account is also known as a share account at a credit union?
Checking Account
Savings Account
Money Market Deposit Account
Certificate of Deposit
Which account is also known as a share draft account at a credit union?
Checking Account
Saving Account
Money Market Deposit Account
Certificate of Deposit
Savings tools are secure and liquid accounts offered by
Banks
Credit Unions
Depository Institutions
Two reasons why savings tools are ideal for storing emergency savings is because they are secure and _______.
Easy
Expensive
Liquid
Risky
In relation to the rate of inflation, it is best to have the rate of return on an investment:
lower, in order to minimze taxes.
lower, in order to minimize risk.
higher, to maintain purchasing power.
higher, to minimize risk.
Hannah needs a savings tool that is very liquid and accessible. Which is the best choice?
Certificate of deposit
Checking account
Money market deposit account
Any of the above savings tools would help Hannah
Which explains a Money Market Account that has tiered interest rates.
The rate of interest earned increases over time
the higher the account balance the more interest you earn
the more accounts you have, the more interest you earn
A tiered account is sold by scam artists who trick people
Which statement describes the security level of savings tools at a bank?
not secure because they have a high risk of losing money.
very secure because there are never risks involved with saving
they are secure because they are protected & insured by the govt
None is true , better to keep at home in a shoe box
Which is a feature of a money market account?
Never a minimum balance requirement
Unlimited transactions every month
money must remain in the account for a specific period of time
Tiered interest rates
Which is a feature of a certificate of deposit (CD)?
Money in a CD is held for a certain length of time.
Money in a CD has tiered interest rates.
Money in a CD are super liquid.
Money in a CD can be accessed with a debit card
In relation to the other options, how liquid is a savings account?
More liquid than cash
More liquid than a Certificate of Deposit
More liquid than a checking account
Less liquid than mutual funds
Which of the following is true in regards to investing in stock?
A stockholder owns a part of a company.
A stockholder will definitely receive a dividend.
A stockholder will always receive a profit when the stock is sold.
When taking advantage of the time value of money, which is most likely to result in the largest return?
Invest as long as possible and at the highest interest rate possible.
Invest a small amount of money for a short period of time at the highest interest rate possible.
Invest a large principal amount of money and then make no additional investments.
Invest at a high interest rate because interest is the only factor that affects return.
Dylan is preparing a presentation about saving and the presentation rubric says that he must include an explanation of compounding interest. Which concept would be
the best one to include in his presentation to show that he
understands compounding interest?
Interest earned on the principal investment
Any form of interest earned from saving or investing
Earning interest on interest
The effect interest has on the total return on investment
In relation to other options, how liquid is a savings account?
More liquid than cash
Less liquid than mutual funds
More liquid than a certificate of deposit
More liquid than a checking account
Real Estate is a form of
Owning
Lending
Which correctly describes the security level of savings tools?
Savings tools are not secure because they have a high risk of losing money.
Savings tools are secure because they are protected by the U.S. government against loss.
Savings tools are very secure because there are not risks involved with saving or investing.
None of the above is true. It would be safer to keep the money at home in a shoe box.
