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WorksheetsUnit 2: CFA 3 (Standard 3)
Total questions: 27
Worksheet time: 14mins
What is the primary function of the financial system in an economy?
To print money for the government
To channel funds from savers to investors
To set interest rates for all banks
To collect taxes from citizens
Which of the following best describes an investor in the context of the financial system?
Someone who spends all their income
Someone who borrows funds to start or expand a business
Someone who only saves money in a piggy bank
Someone who works at a bank
Which financial instrument is commonly used by savers to lend money to investors?
Bonds
Coupons
Receipts
Invoices
How do banks help channel funds from savers to investors?
By storing money in vaults
By lending deposited funds to borrowers
By printing new currency
By selling groceries
Which of the following scenarios best illustrates the flow of funds from savers to investors?
A person buys groceries from a store
A bank uses customer deposits to provide a loan to a business
A company pays its employees
A government collects taxes
Why do investors need funds from savers in the financial system?
To pay taxes
To finance new projects or expand businesses
To store money safely
To avoid paying interest
A company wants to build a new factory but lacks the necessary funds. Which part of the financial system would most likely help the company obtain the needed capital?
The postal service
The stock market
The local grocery store
The transportation department
Which of the following best explains why interest rates are important in the process of channeling funds from savers to investors?
They determine the color of currency
They provide an incentive for savers to deposit money and for investors to borrow funds
They are set by grocery stores
They are only used for international trade
Analyze the potential impact on the economy if the financial system fails to channel funds efficiently from savers to investors.
Economic growth may slow down due to lack of investment
All savers will become wealthy
The government will collect more taxes
There will be no effect on businesses
Suppose interest rates rise significantly. Predict how this change might influence the behavior of savers and investors in the financial system.
Savers may be more likely to save, while investors may borrow less due to higher costs
Both savers and investors will ignore interest rates
Investors will borrow more money
Savers will withdraw all their funds
What is the main advantage of paying your credit card balance in full each month?
You avoid paying interest charges
You increase your credit limit automatically
You receive more reward points
You can skip future payments
Which of the following is a potential consequence of only making the minimum payment on your credit card balance?
Your balance will be paid off faster
You will pay more in interest over time
Your credit card will be canceled
You will receive a lower interest rate
Suppose you have a high credit card balance. Which strategy is generally recommended to pay it off efficiently?
Transfer the balance to a debit card
Pay more than the minimum payment each month
Ignore the balance until you have more income
Make only the minimum payment each month
Which of the following is generally considered a less risky investment?
Cryptocurrencies
Venture capital
Penny stocks
Government bonds
What is a potential benefit of choosing a riskier investment over a less risky one?
Fixed interest payments
No chance of losing money
Higher potential for greater returns
Guaranteed returns
If an investor wants to minimize the chance of losing their initial investment, which option should they consider?
Trading in foreign currencies
Opening a savings account
Buying lottery tickets
Investing in start-up companies
Which of the following best describes a certificate of deposit (CD)?
A type of savings account with no fixed term
A loan given to a business by a bank
A fixed-term deposit that pays interest and restricts access to funds until maturity
A credit card with a low interest rate
What typically happens if you withdraw money from a certificate of deposit before its maturity date?
You are required to open a new CD
Your account is upgraded to a higher interest rate
You pay an early withdrawal penalty
You receive a bonus interest payment
Which of the following is usually an advantage of investing in a certificate of deposit compared to a regular savings account?
Variable interest rates
Higher interest rates
Unlimited withdrawals
No minimum deposit requirement
Which of the following is a key difference between credit unions and banks?
Credit unions only operate online, while banks have physical branches
Credit unions are owned by their members, while banks are owned by shareholders
Banks are non-profit organizations, while credit unions are for-profit
Banks do not offer loans, but credit unions do
What is a typical advantage of joining a credit union instead of a traditional bank?
No access to ATMs
Fewer financial products available
Lower interest rates on loans and higher interest rates on savings
Higher fees on checking accounts
Which of the following best describes a payday lender?
A company that offers long-term mortgages
A financial institution that provides small, short-term loans at high interest rates
A government agency that manages retirement funds
A non-profit organization that gives grants to students
What is a common risk associated with using payday lenders?
Being required to open a savings account
Paying high fees and interest rates that can lead to a cycle of debt
Receiving a lower credit score automatically
Getting a loan with no repayment schedule
Which alternative is generally considered safer than borrowing from a payday lender?
Taking out a credit card cash advance
Applying for a payday loan rollover
Borrowing from friends or family
Using a pawn shop loan
What is a potential risk of using a credit card instead of a debit card for everyday purchases?
Having to pay ATM withdrawal fees
Not being able to make online purchases
Accruing debt and paying interest if the balance is not paid in full
Overdrawing your checking account
Which of the following is an advantage of using a debit card over a credit card?
Improved credit score with every purchase
Ability to spend more than you have in your account
No risk of accumulating interest charges
Higher rewards and cashback offers
Why are credit cards safer to use when traveling internationally?
