Changes in monetary policy occur when the Federal Reserve
  • changes spending levels to affect the economy.
  • An investor makes money by earning interest.
  • Fees and expensesnominal interest ratetaxes
  • Bonds pay a specified amount at maturity.
William is not generally a risk-taker, but he knows he may need to step out of his comfort zone to make enough money for retirement.Which investment option would best meet William's needs?
  • a commodity
  • $3,675
  • diversification.
  • low risk.
The graph shows the effect of inflation.Approximately how much of the initial investment's value would be lost after 15 years at 3% inflation?
  • 401k
  • 40%
  • Spread your investments in several different areas.
  • 1.75%
Putting money into more than one kind of investment at a time is called
  • Bonds pay a specified amount at maturity.
  • low risk.
  • diversification.
  • Prices fluctuate on the basis of demand.
Which investor is making a common error?
  • An investor makes money by earning interest.
  • 401k
  • an employee of a popular hardware store who invests only in that company's stock
  • People are less worried when they know they have protection from risk.
Bonds are considered to offer a guaranteed return, as they must be honored by law, but which is still a potential risk that investors face?
  • the increased value of an asset.
  • The issuer could go bankrupt.
  • It decreases the value of money.
  • knows they will need cash in the near future.
If a company pays dividends on a stock, does that mean that the stock has appreciated in value? Why or why not?
  • No, the payment of dividends indicates that a company has earned profits.
  • -increased interest rates-decreased borrowing-decreased investing
  • The insurance company finds that a homeowner intentionally caused damage
  • The value of the premiums the company takes in is higher than the value of the payouts it makes.
An investment with a stable and predictable history will most likely have
  • the loan.
  • premium
  • 401k
  • low risk.
How can an insurance company make a profit by taking in premiums and making payouts?
  • The insurance company finds that a homeowner intentionally caused damage
  • The greater the risk, the greater the potential return.
  • No, the payment of dividends indicates that a company has earned profits.
  • The value of the premiums the company takes in is higher than the value of the payouts it makes.
Compared to a short-term investment, a long-term investment is generally considered
  • a pool of funds
  • An investor makes money by earning interest.
  • to be equally as risky.
  • Prices fluctuate on the basis of demand.
Which is true about investments and risk?
  • The greater the risk, the greater the potential return.
  • An investor makes money by earning interest.
  • An index measures market performance.
  • Every investment carries some degree of risk.
_________ policy involves government changes to spending or taxation to affect the economy.
  • stated
  • 1.75%
  • premium
  • Fiscal
Which best describes what a market index does?
  • An investor makes money by earning interest.
  • Fees and expensesnominal interest ratetaxes
  • natural resources
  • An index measures market performance.
Compared to high-risk investments, low- and medium-risk investments are in higher demand because they
  • are considered safer.
  • The issuer could go bankrupt.
  • It decreases the value of money.
  • predictability
Most people prefer to pay health insurance premiums rather than pay out-of-pocket for medical expenses because
  • medical costs can be extremely high, and insurance is more affordable than paying out-of-pocket for a hospital stay.
  • No, the payment of dividends indicates that a company has earned profits.
  • People can contribute to the account until retirement age. Contributions to the account are limited each year. Contributions can be deducted from federal taxes.
  • invest in US savings bonds because of its short term.
Capital appreciation refers to
  • An index measures market performance.
  • the increased value of an asset.
  • It decreases the value of money.
  • The amount paid for an insurance policy
Which are common mistakes people make when investing? Check all they apply.
  • How am I protected as an investor? What guarantees are in place so I make money? What taxes will I have to pay on this investment?How do the risks compare to the potential gains? What are the chances that the investment will fail?
  • Every investment carries some degree of risk.
  • People can contribute to the account until retirement age. Contributions to the account are limited each year. Contributions can be deducted from federal taxes.
  • They invest more money than they can afford.They focus heavily on familiar investment opportunities. They hold onto investments longer than they should to recoup losses. They put all of their money into one kind of investment at a time
After he bought a new car, Nelson purchased car insurance. He must pay $75 each month for the plan.Later that month, Nelson caused a car accident when he lost control of his vehicle. He was required to pay the first $500 of his repair costs, and then the insurance company covered the rest.Read the passage about Nelson's car insurance.What is the $75 payment Nelson must make each month?
  • life insurance
  • premium
  • Fiscal
  • changes spending levels to affect the economy.
In what circumstance would a property insurance claim be rejected?
  • The value of the premiums the company takes in is higher than the value of the payouts it makes.
  • -the company's financial health-market performance-the economy
  • The insurance company finds that a homeowner intentionally caused damage
  • People are less worried when they know they have protection from risk.
Which statement best describes how inflation affects the value of investments over time?
  • The greater the risk, the greater the potential return.
  • It decreases the value of money.
  • increased interest ratesdecreased borrowingdecreased investing
  • mutual fundsbondscommodities
If the nominal interest rate is 4.00% and the rate of inflation is 2.25%, what is the real interest rate?
  • Share
  • -increased interest rates-decreased borrowing-decreased investing
  • 1.75%
  • 40%
Which investment has the least liquidity?
  • an employee of a popular hardware store who invests only in that company's stock
  • 401k
  • premium
  • 40%
Which statements are true regarding an individual retirement account? Check all that apply.
  • People can contribute to the account until retirement age. Contributions to the account are limited each year. Contributions can be deducted from federal taxes.
  • How am I protected as an investor? What guarantees are in place so I make money? What taxes will I have to pay on this investment?How do the risks compare to the potential gains? What are the chances that the investment will fail?
  • increased interest ratesdecreased borrowingdecreased investing
  • It decreases the value of money.
Once stocks are on the market, which best explains how their prices are set?
  • NOT They both invest money to earn a profit.
  • to recognize the effects of inflation
  • The greater the risk, the greater the potential return.
  • Prices fluctuate on the basis of demand.
The graph shows examples of investments with high and low liquidity.An investment with more liquidity would be ideal for someone who
  • Spread your investments in several different areas.
  • The issuer could go bankrupt.
  • knows they will need cash in the near future.
  • NOT They both invest money to earn a profit.
Interest rates are expressed as a percentage of
  • low risk.
  • bonds
  • the level of risk in an investment
  • the loan.
Which questions should Robert ask himself before investing the $10,000 he inherited? Check all that apply.
  • People can contribute to the account until retirement age. Contributions to the account are limited each year. Contributions can be deducted from federal taxes.
  • increased interest ratesdecreased borrowingdecreased investing
  • The greater the risk, the greater the potential return.
  • How am I protected as an investor? What guarantees are in place so I make money? What taxes will I have to pay on this investment?How do the risks compare to the potential gains? What are the chances that the investment will fail?
Which is an example of a short-term investment?
  • bonds
  • premium
  • 401k
  • oil
If the Federal Reserve decreased the money supply, what would the effects be? Check all that apply.
  • increased interest ratesdecreased borrowingdecreased investing
  • No, the payment of dividends indicates that a company has earned profits.
  • The greater the risk, the greater the potential return.
  • -increased interest rates-decreased borrowing-decreased investing
Interest rates generally reflect
  • the loan.
  • the level of risk in an investment
  • The amount paid for an insurance policy
  • the increased value of an asset.
Which of these are considered both short- and long-term investments? Check all that apply.
  • mutual fundsbondscommodities
  • It decreases the value of money.
  • NOT They both invest money to earn a profit.
  • natural resources
Which factors can affect a stock's price? Check all that apply.
  • The insurance company finds that a homeowner intentionally caused damage
  • increased interest ratesdecreased borrowingdecreased investing
  • -the company's financial health-market performance-the economy
  • The greater the risk, the greater the potential return.
Which can be traded in a commodities market?
  • predictability
  • 40%
  • natural resources
  • oil
Which of these affect real investment value? Check all that apply.
  • The greater the risk, the greater the potential return.
  • Fees and expensesnominal interest ratetaxes
  • Every investment carries some degree of risk.
  • An investor makes money by earning interest.
If two people are invited to invest and become partners in a business, the business owners will then ________ the risk.
  • medical costs can be extremely high, and insurance is more affordable than paying out-of-pocket for a hospital stay.
  • 1.75%
  • bonds
  • Share
Which type of insurance policy would someone get to protect others only?
  • predictability
  • diversification.
  • life insurance
  • Fiscal
Which statement best describes how an investor makes money off debt?
  • An index measures market performance.
  • It decreases the value of money.
  • An investor makes money by earning interest.
  • Every investment carries some degree of risk.
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