Worksheetsunit 3 pt 2 review
Total questions: 78
Worksheet time: 39mins
Which statement best defines savings in personal finance?
Income set aside and not spent now
Borrowed money used for daily bills
Future income promised by an employer
Assets sold to pay existing debts
Investments are best described as the use of current income to:
Create potential future benefits
Eliminate all financial risk
Increase current consumption
Repay past due liabilities
Which option lists institutions that are part of the financial system?
Banks, insurers, bond and stock markets
Retailers, factories, and shipping firms
Tax agencies, courts, and schools
Households, charities, and museums
Which is NOT a typical type of savings instrument?
Certificates of Deposit at banks
Corporate or government bonds
Checking account overdrafts
Savings accounts at S&Ls
In a basic transaction, who is the borrower in financial markets?
The agent receiving funds from investors
The person providing excess funds
The regulator overseeing markets
The broker matching orders only
What is a financial asset in this context?
Written confirmation of a claim on property
Physical equipment used in production
Cash stored at home in envelopes
A certificate of course completion
Which statement best characterizes a financial market?
A venue where buyers and sellers trade financial assets
A store where consumers purchase household goods
A forum for discussing personal budgeting tips
A tax office that collects government revenue
Which statement best defines a financial intermediary?
An institution that directly sells goods to consumers
An institution that collects savings and invests in financial assets
A government agency that sets interest rate targets
A marketplace where individuals trade physical commodities
Which role is primarily associated with banks, savings and loans, and credit unions?
Issuing bonds to global investors only
Taking deposits and providing loans to customers
Trading currencies for export businesses
Selling insurance policies to households
Finance companies most commonly perform which function?
Manage pooled equity portfolios for retail investors
Make loans to households or small businesses
Collect premiums and invest for policyholders
Hold deposits and offer checking accounts
Pension funds mainly handle money for which group and purpose?
Individual day traders seeking short-term gains
Groups of workers investing for retirement benefits
Start-up founders building venture portfolios
Retirees purchasing annuities for immediate income
What distinguishes mutual funds compared with holding individual securities directly?
They require specialized trading licenses to buy
They pool many investors’ money to buy diversified assets
They guarantee principal repayment regardless of markets
They operate only through employer-sponsored plans
A life insurance company’s investment activity most directly involves which source of funds?
Tax revenues collected from residents
Premiums collected from policyholders
Interest charged on credit card balances
Fees earned from brokerage commissions
Which term best describes how quickly a financial asset can be converted into cash without significant loss of value?
Liquidity
Resaleability
Maturity
Yield rate
A Treasury bill maturing in six months would most likely trade in which market category?
Money market
Capital market
Primary market
Secondary market
Which statement best defines the primary market?
Market where newly issued assets are sold by issuers
Market where previously issued assets are resold between investors
Market for long-term government borrowing instruments
Market that guarantees price appreciation for first buyers
An investor buys shares in an IPO and later sells them to another investor on an exchange. What are the two markets used in order?
Primary then secondary
Secondary then primary
Money then capital
Capital then money
Which asset is most aligned with the capital market by typical maturity?
30-year corporate bond
3-month Treasury bill
Seven-day savings bond
Short-term commercial paper
Resaleability most directly addresses which question about a financial asset?
Can the asset be sold again to others?
How long until the asset matures?
What interest does the asset pay?
Is the asset issued by the government?
Why do secondary markets contribute to liquidity for personal investors?
They allow assets to be resold quickly for cash
They extend the maturities of all securities
They eliminate all transaction risks for sellers
They guarantee prices above original cost
Which pairing correctly matches market with example from typical descriptions?
Primary market — stock IPOs
Secondary offering — brand-new savings bonds
Money market — thirty-year mortgages
Capital market — short-term CDs
What best describes an investment objective in personal finance?
A spending limit set for each month
A financial goal guiding suitable investments
A list of all current bank accounts
A prediction of next year’s stock prices
How does a longer time frame until you need the money typically affect your investment choice?
You can choose less liquid, potentially higher growth assets
You must keep all funds in cash for quick access
You should only use extremely liquid, low-yield accounts
You need to avoid any risk regardless of returns
Which situation most likely requires a more liquid investment?
Saving for retirement in forty years
Building a college fund for a toddler
Buying a house in fifteen years
Paying a car down payment in six months
Which factor is most directly related to income level when choosing investments?
How many credit cards are in your wallet
How much debt you owe and cash flow available
Which brokerage offers free stock trades
Whether you prefer real estate or stocks
A student plans to buy a car soon after graduating next year. Which investment feature should be prioritized?
High liquidity and low principal risk
Long lockups with high potential growth
Tax advantages with long holding periods
Illiquid assets with large entry costs
Which goal most closely aligns with a long-term investment horizon?
Setting aside cash for emergencies this month
Funding a vacation during spring break
Saving to buy a house someday in the future
Covering this semester’s textbook costs
Which statement best defines investment risk?
Chance an investment will lose value
Guaranteed growth of invested funds
Fixed interest paid by all assets
Government protection against all losses
What is the most accurate definition of return?
Profit or loss earned on an investment
Interest rate promised by a bank
Original principal placed into an account
Increase in market prices every year
Which option best describes diversification in investing?
Spreading money across different assets
Putting all funds into one stock
Avoiding any risky securities entirely
Timing purchases to beat the market
Two portfolios have different risk levels. According to the risk–return relationship, which is more likely for the higher‑risk portfolio?
Greater potential return over time
Guarantee of steady income
Lower volatility in market dips
Protection by federal insurance
You have $5,000 to invest and want to limit risk while earning some return. Which allocation best applies diversification?
Split across a bond fund and stock fund
Place entirely in a tech stock
Hold only long‑term corporate bonds
Keep all funds in cash at home
Rank these from lowest to highest typical risk: corporate stock, treasury bills, savings account.
Savings account, treasury bills, corporate stock
Treasury bills, savings account, corporate stock
Corporate stock, treasury bills, savings account
Savings account, corporate stock, treasury bills
A diagram shows a rising line from low risk/low return to high risk/high return. Where would money market funds most likely appear relative to aggressive stock funds?
Lower risk and lower return potential
Higher risk and higher return potential
Equal risk and equal return potential
Higher risk but lower return potential
Which statement best defines a stock in finance?
Ownership share in a corporation
Loan agreement with a corporation
Government tax on corporate profits
Certificate for company products
What is the primary difference between common stock and preferred stock regarding voting?
Common stock usually has voting rights
Preferred stock grants extra voting rights
Both types never include voting rights
Voting rights depend on stock exchange
Dividends are best described as which of the following?
A share of a corporation’s profits
A fee paid to buy shares
The tax on capital gains
A penalty when selling stock
Capital gains occur when an investor does what?
Sells a stock above purchase price
Receives quarterly cash dividends
Buys more shares during an IPO
Holds stock through a market drop
Which feature is most associated with preferred stock compared to common stock?
Dividends are typically set and prioritized
Earnings are reinvested without payouts
Higher volatility and changing dividends
Guaranteed voting rights at meetings
Where are shares first sold to raise money for the corporation?
Initial Public Offering in the primary market
Secondary market after exchange listing
Over-the-counter resale between investors
Employee stock purchase plan exchange
An investor wants more predictable income and is less concerned with voting. Which choice aligns best?
Buy preferred stock for set dividends
Buy common stock for higher volatility
Trade only in the secondary market
Avoid dividends and seek capital losses
Which statement best describes a stock exchange?
A centralized marketplace where buyers and sellers trade
A government office that prints new company shares
A bank department that manages personal savings accounts
A private club where only brokers pay membership fees
What distinguishes the NYSE from NASDAQ historically?
NYSE operated like an auction floor; NASDAQ was electronic
NYSE listed only tech firms; NASDAQ listed only banks
NYSE traded commodities only; NASDAQ traded currencies only
NYSE used no brokers; NASDAQ banned market makers entirely
Which is true about NASDAQ based on common features?
It was the first electronic stock market and grew rapidly
It is a physical open-outcry commodity exchange only
It prohibits electronic trading for retail investors
It is smaller and slower than most United States markets
In a futures contract, what is the key obligation?
Both parties must buy or sell at a set future term
The buyer may buy later without any commitment
The seller provides a right with no exercise window
Either party can cancel anytime without settlement
Which statement best captures an options contract?
It grants a right without an obligation to transact
It requires daily settlement marked to market always
It fixes delivery for commodities on every trade date
It eliminates premiums and margins for all positions
Which item is a commodity in derivatives examples?
Grains or precious metals used for trading
Corporate logos licensed for advertising
Digital art files minted by musicians
Retail coupons issued by supermarkets
The Internet most directly enabled which development in stock trading?
Individuals trading through online brokerage platforms
Exclusive in-person floor trading by member clerks
Prohibition of market access for retail investors
Mandatory paper tickets for every stock order
What is the primary purpose of a stock market index?
To track trends across a specific set of stocks
To guarantee profits for all stock investors
To set official prices for every traded stock
To replace brokers in buying and selling shares
Which statement best describes the Dow Jones Industrial Average?
Index tracking 30 large companies on the NYSE
Fund investing in 300 mid-cap global firms
Exchange listing small technology startups
Government report on quarterly economic growth
What does the S&P 500 represent?
Index of 500 large-cap American corporations
Portfolio of 50 international energy companies
Bond index covering municipal securities
Ranking of top 500 investment advisors
Which scenario indicates a bull market?
Stock prices rise steadily over time
Interest rates spike unexpectedly
Corporate earnings fall sharply
Trading volume stops for several days
Which scenario indicates a bear market?
The trend in stock prices shows decline
Dividend yields increase for one quarter
More companies issue new shares publicly
Market volatility drops to near zero
A stockbroker’s core function is to do what for clients?
Buy and sell stocks on their behalf
Provide free insurance for portfolios
Set official exchange trading hours
Guarantee returns on mutual funds
Which role describes how a stockbroker operates in the market?
Agent matching buyers and sellers of stocks
Auditor certifying corporate financial statements
Regulator enforcing national trading laws
Analyst publishing government employment data
Beyond executing trades, what additional service might stockbrokers offer?
Advice on which stocks or mutual funds to buy
Legal representation in merger negotiations
Tax collection for federal revenue agencies
Underwriting of municipal bond offerings
What does the maturity date of a bond represent?
The date coupon payments begin
The date the bond is repaid
The date the bond is issued
The date interest rate resets
Par value of a bond is best defined as:
Market price during trading
Amount promised at maturity
Total coupons paid yearly
Interest due at issuance
The coupon rate on a bond is the:
Annual interest paid to holder
Yield realized to maturity
Rate used to price the bond
Penalty for early redemption
Which is a common reason to invest in bonds?
Speculative day trading gains
Interest income from coupons
Voting control in companies
Tax-free stock dividends
According to typical risk-return profiles, which pairing is most accurate?
Stocks low risk, high return
Bonds high risk, stable return
Stocks high risk, high potential
Bonds high risk, low potential
In a company liquidation, bondholders generally:
Are paid before stockholders
Share losses with stockholders
Receive nothing in all cases
Are paid after stockholders
How do investors primarily earn money from bonds compared with stocks?
Bonds: price jumps; Stocks: rent income
Bonds: interest payments; Stocks: dividends and growth
Bonds: rental cash flows; Stocks: fixed coupons
Bonds: management fees; Stocks: capital calls
When might an investor favor bonds over stocks based on typical uses?
Seeking short-term stability
Pursuing aggressive long-term growth
Maximizing ownership control
Avoiding any form of interest
Yield on a bond most closely refers to the:
Average rate of return
Nominal par value
One-time issue price
Total future coupons
Which U.S. Treasury security has a maturity of less than one year?
Treasury bond with more than ten years
Treasury note with one to ten years
Treasury bill with under one year
Municipal bond issued by local governments
Municipal bonds are primarily issued by which entities?
Large multinational corporations
State and local governments
Federal government agencies
Private investment funds
Corporate bonds typically offer what compared to government bonds?
Lower risk and lower reward
Higher risk and higher reward
Guaranteed returns without risk
Shorter maturities under one year
Which description best fits a junk bond?
Low yield, low risk, high rating
High yield, high risk, low rating
Medium yield, medium risk, strong rating
Guaranteed yield, no risk, federal backing
Identify the investment-grade cutoff for S&P ratings.
AAA to AA only are investment grade
AAA to A are investment grade
AAA to BBB are investment grade
BB and below are investment grade
Match each rating category to its risk level in the table.
AAA corresponds to highest quality risk
BBB corresponds to medium grade risk
BB corresponds to speculative risk
D corresponds to in default risk
A company needs capital quickly and has a low rating. Which bond type is it most likely to issue?
Municipal bond to fund local projects
Treasury bond with more than ten years
Investment-grade corporate bond
Junk bond with high yield and risk
Which statement about Treasury notes is accurate?
They mature in one, three, five, seven, ten years
They always mature in less than one year
They are issued only by local governments
They carry higher risk than junk bonds
Which investment pools money from many investors to buy a diversified portfolio of securities?
Mutual fund
Certificate of deposit
Money market account
Annuity
Which product is a time deposit with a fixed interest rate and a set maturity date?
Mutual fund
Individual Retirement Account
Certificate of deposit
Money market account
Which account is federally insured, functions like a savings account, and typically limits the number of checks per month?
Money market account
Mutual fund
Annuity
Individual Retirement Account
Which option is a retirement plan account that offers tax advantages for long‑term savings?
Certificate of deposit
Individual Retirement Account
Money market account
Mutual fund
Which investment is a contract with an insurance company to receive periodic payments, either now or in the future?
Annuity
Mutual fund
Money market account
Certificate of deposit
