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FP 1 Unit 2 Test Review

Total questions: 50

Worksheet time: 25mins

Name
Class
Date
1.

A marketplace where trading of securities such as equities, bonds, currencies, and derivatives occurs is referred to as a:

a)

call market

b)

bear market

c)

financial market

d)

foreign exchange market

2.

In which financial market do people make investments in cocoa beans and corn?

a)

money

b)

insurance

c)

soft commodities

d)

selective property

3.

A level of performance that describes using the least amount of input to achieve the highest amount of output is known as:

a)

commodity

b)

efficiency

c)

liquidity

d)

market

4.

Which type of financial market sells new stock or bond issues to investors?

a)

primary capital

b)

soft commodities

c)

secondary capital

d)

hard commodities

5.

A type of market in which each transaction takes place at predetermined time intervals is referred to as a:

a)

call market

b)

bond market

c)

financial market

d)

continuous market

6.

A type of market that allows traders to trade any time the market is open is known as a:

a)

call market

b)

bond market

c)

financial market

d)

continuous market

7.

The term that refers to how easily an asset can be converted to cash is known as:

a)

commodity

b)

currency

c)

Eurobond

d)

liquidity

8.

A form of money held or traded outside the country in whose currency its value is stated is known as:

a)

US currency

b)

Eurocurrency

c)

export currency

d)

import currency

9.

This is a guarantee that a check, ATM, wire transfer or debit card transaction will clear if the account balance falls below zero

a)

Bank account

b)

Overdraft Protection

c)

Asset Management

d)

Checking account

10.

Chris wants to open a small business, and he has a very good business plan that is likely to succeed. Where would Chris be most likely to go to apply for a loan?

a)

Local Bank

b)

National Bank

c)

Insurance Company

d)

Mortgage Company

11.

Marcus wants to invest a portion of his money in long-term securities to finance his son's college education and his own retirement. To help him make the best investment decisions, Marcus should obtain the services of a:

a)

Loan officer

b)

Licensed tax accountant

c)

certified financial planner

d)

credit-union representative

12.

Individuals are most likely to require the services of a mortgage company when they want to:

a)

purchase real estate

b)

earn interest on savings

c)

Acquire liability insurance

d)

invest in the stock market

13.

Brian recently got his first part-time job as a food bagger at a local grocery store. He needs a safe place to store his income that allows him to withdraw money easily and frequently. Brian should consider opening which type of account?

a)

savings

b)

checking

c)

health savings

d)

individual retirement

14.

The direction of a client's cash and securities by a financial services company, usually an investment bank, or an individual is known as:

a)

A lockbox

b)

a vendor lease

c)

private placement

d)

asset management

15.

A service that a bank provides to a company for the receipt of customers' payments, which are directed to a special post office box instead of directly to the company, is referred to as a/an:

a)

lockbox

b)

vendor lease

c)

private placement

d)

asset management

16.

Which type of protection ensures that a check, ATM, wire transfer, or debit card transaction will clear if the account balance falls below zero?

a)

asset

b)

liability

c)

overdraft

d)

system

17.

The electronic clearance and settlement system used for financial transactions by U.S. commercial banks and other institutions is called the:

a)

Federal Reserve system (FRS)

b)

Automated clearing house (ACH)

c)

Automated teller machine (ATM0

d)

Federal Deposit Insurance Corporation (FDIC)

18.

The threat to wealth creation is

a)

Compounding

b)

Inflation

c)

Deflation

d)

None of these

19.

In order to create wealth and to manage inflation, one should

a)

Save

b)

Invest

c)

Consume

d)

None of these

20.

Investment in shares creat wealth in long run.

a)

False

b)

True

c)

None of these

21.

Diversification is the advantage of investment through

a)

Shares

b)

Mutual funds

c)

Property

d)

None of these

22.

Comparatively, Mutual funds are riskier than shares.

a)

True

b)

False

c)

None of these

23.

_____ describes how easily an asset can be converted into currency.

a)

Smelliness

b)

Stickiness

c)

Hotness

d)

Liquidity

24.

A ____ is a financial intermediary that accepts deposits, makes loans, and offers checking accounts.

a)

bank

b)

payday lender

c)

federal reserve

d)

brokerage firm

25.

Banks earn _____ on their loans, and with that money they pay _____ to their depositors, cover their own operating costs, and earn a profit. (Same word for both blanks.)

(a)  

26.

If a bank does fail, federal ____ insurance will cover up to $250,000 per account.

a)

homeowners'

b)

deposit

c)

life

d)

bank

27.

The entity that insures bank customers up to $250,000 per account is the ____.

a)

CPSC

b)

SEC

c)

FDIC

d)

FTC

28.

Investments include financial risks

a)

True

b)

False

29.

You need to be aware of different financial products available to you

a)

True

b)

False

30.

Which of the following institutions does not belong to the group?

a)

Expanded Comml Banks

b)

Ordinary Comml Banks

c)

Thrift Banks

d)

Pawnshops

31.

Which of the following institutions does not belong to the group?

a)

Private Devt Banks

b)

Savings and Mortgage Banks

c)

Stock Savings and Loan Association

d)

Rural Banks

32.

Investors are influenced by the projected _________ on their capital.

a)

market

b)

return

c)

rate

33.

The Stock Exchange deals with the purchase and sale of ________.

a)

stocks and shares

b)

bulls and bears

c)

statements and invoices

34.

The purpose of the risk pyramid is to show a comparison of:

a)

one stock to another

b)

one investment to another

c)

stocks to stock mutual funds

d)

corporate bonds to municipal bonds

35.

Ownership investments are ideal for investors who are:

a)

risk-averse

b)

risk-tolerant

c)

close to retirement

d)

just beginning to invest

36.

Investors take a risk for the potential of receiving a:

a)

Bonus

b)

prize

c)

promotion

d)

return

37.

Which is an advantage of a money market account over a savings account?

a)

The rate of return on money account is significantly better.

b)

Money market accounts provide corporate ownership rights.

c)

One can often write checks from a money market account.

d)

Money market accounts are insured by the FDIC.

38.

One of the biggest risks to a real estate investment is:

a)

Depreciation

b)

a low rate of return

c)

lacking FDIC insurance

d)

the inability to write checks

39.

Which statement is true about certificates of deposit?

a)

They may depreciate in value

b)

The riskiest investment is a certificate of deposit

c)

one must pay a penalty for withdrawing money early

d)

Certificate of deposit are issued by corporations or governments

40.

Which is an example of a lending investment?

a)

bond

b)

stocks

c)

antiques

d)

real estate

41.

In investing, legal lending or owning agreements between individuals,

businesses, or governments are known as:

a)

bonds

b)

guarantees

c)

securities

d)

treaties

42.

A disadvantage of owning stocks is the:

a)

A high degree of risk

b)

Low potential for return

c)

penalty for early withdrawal

d)

potential for loss of time and effort

43.

Which is an advantage of investing in bonds?

a)

They are very low risk

b)

they are insured by the FDIC

c)

They offer extremely high rate of return.

d)

They permit people to access their money at any time.

44.

With a lending investment, investors:

a)

avoid taking any risk

b)

hire a financial advisor

c)

allow borrowers to use their money for a price

d)

maintain a minimum amount of money in the investment

45.

Which is a disadvantage of investing in a savings account?

a)

The account's potential for loss is high.

b)

The rate of return fails to keep up with inflation

c)

One must pay a penalty for withdrawing money early

d)

A minimum balance is required to keep the account active

46.

Which are often considered one of the safest investments?

a)

commodities

b)

penny stocks

c)

precious metals

d)

government bonds

47.

With an ownership investment, investors:

a)

buy a home to live in.

b)

collect popular items.

c)

invest in multiple corporations.

d)

pay for the right to own something.

48.

Which is a factor that determines how much investment risk a person can handle?

a)

goals

b)

income

c)

social status

d)

banking institution

49.

Which is an example of a real estate investment?

a)

Corporate Bond

b)

Certificate of Deposit

c)

Partial ownership of a Corporation

d)

Land to be developed in the future

50.

Which statement most accurately describes the relationship between risk and return?

a)

For the potential of a low return, an investor usually accepts no risk.

b)

For the potential of a high return, an investor usually accepts a low

risk.

c)

For the potential of a low return, an investor usually accepts a high

risk.

d)

For the potential of a high return, an investor usually accepts a high

risk.