Saving
When ________, a consumer sets aside a portion of their income for future use. This can be done in several ways such as easily accessed accounts and CDs.
a. investing
b. saving
c. assuming risk
d. using credit
What is b. saving
Safest way to save your money and see it grow over time is to ______
a. open and interest-bearing account at your bank
b. purchase a government savings bond
c. pool money into a mutual fund
d. buy a corporate bond
What is a. open and interest-bearing account at your bank
Which of the following is NOT true about Roth IRA accounts
a. there are fewer restrictions for taking the money out before retirement
b. you pay taxes upfront: you will not pay taxes when you withdraw the money later
c. if your employer does not offer a retirement plan you can set up an IRA yourself
d. You will NEVER have to pay state or federal taxes on a Roth IRA accound
what is d. You will NEVER have to pay state or federal taxes on a Roth IRA accound
Wise consumers find ways for their money to grow, which means allowing it to earn additional money and continue to grow. In other words, they want to ______
a. earn interest
b. create credit
c. buy insurance
d. liquidate their cash
What is a. earn interest
There are many types of risks associated with savings and investing. "Market" risk is the potential that your investment will be worth less tomorrow than it is today bc prices or values have dropped. Which of the following would NOT be considered an example of an investment involving "market" risk?
a. buying a government savings bond
b. purchasing a home
c. buying a new car
d. purchasing gold or silver
What is a. buying a government savings bond
Depending upon your expectations for retirement, the choices you make could have a significant impact on your lifestyle. Which of the following is NOT a suggested strategy to increase your retirement savings?
a. be aware of social security payments which will be enough for your needs
b. rethink your goals and consider making few expensive luxury expenditures
c. postpone retirement and work a few more years
d. put more money aside by increasing contributions to your retirement savings
what is a. be aware of social security payments which will be enough for your needs
Which of the following is the most important reason for setting up an emergency savings account as one of the first steps in developing a savings strategy?
a. The money will be there when wanting to buy luxury items such as new cars.
b. The money can be used for paying rent and utility bills if you lose your job.
c. The money can be invested in highly profitable stocks and bonds.
d. The money will earn the highest rate of interest from your bank.
What is b. The money can be used for paying rent and utility bills if you lose your job.
Why are government bonds preferred by many consumers over corporate bonds?
a. Corporate bonds are like loaning money to a company; you essentially become an owner.
b. if something happens to the company, owners of corporate bonds will be returned their initial investment.
c. Government bonds are backed by the US government so their is little to no default risk
d. Because of the length of maturity, government bonds can be cashed easily for emergencies.
What is c. Government bonds are backed by the US government so their is little to no default risk
Investing generally involves more complex financial instruments such as mutual funds, stocks, or real estate. Why should investing be a later step in your savings strategy?
a. Only financial professionals understand stocks
b. Stock and bonds are too expensive
c. There is higher risk of loss than a savings account.
d. Savings accounts pay much higher interest rates.
c. There is higher risk of loss than a savings account.
How could a consumer who keeps their money in a checking account and spends no money out of the account, actually lose money over time?
a. inflation can increase price of goods and service over time
b. unused funds can be claimed by the bank
c. no deposits are guaranteed by government-backed insurance
d. higher tax rates will apply to unused money of a specific time period
What is a. inflation can increase price of goods and service over time
Which of the following would NOT be considered a good strategy for beginning to save?
a. Save pay raises or cash gifts: Do not spend them
b. Save income tax refunds
c. wait several days before making an impulse purchase
d. research a profitable company and purchase stock
What is d. research profitable company and purchase stock
Another way an individual can prepare for retirment is a 401k in which you and your employer both put money into a specially designed investment account. Which of the following is a DISADVANTAGE to setting up a 401k?
a. many employers will match how much money the employee places in their account
b. money put into a 401k is tax-free at the time it is invested
c. employees can take out their money before they retire
d. because they are investments, there is no guarantee of return or interest earned.
what is d. because they are investments, there is no guarantee of return or interest earned.
A _____ provides an opportunity for investors to pool their money together to buy different financial products such as stocks and bonds, which are managed by a professional money manager. They are a good way for people with limited money and knowledge to get started.
a. Government savings bond
b. certificates of deposit
c. mutual fund
d. stock portfolio
what is c. mutual fund
What is the general rule about investing that consumers should remember?
a. The lower the risk the greater potential of earning.
b. Increase levels of risk have greater potential for higher rates of return
c. No savings strategies are completely safe from loss
d. Different kinds of investments provide similar rates of returns.
What is b. Increase levels of risk have greater potential for higher rates of return
Most every worker will rely on _____ income when they retire. This is a federal program that requires employers and workers to make contributions (FICA deductions from paycheck) which are later used to make payments to people who have reached a certain age or unable to work because they are disabled.
a. Government savings bonds
b. Social Security
c. Medicare
d. Annuities
what is b. Social Security
What does the statement, "Saving your money allows you to pay yourself rather than having to pay someone else" mean?
a. Setting aside money is like getting a second paycheck
b. If you save instead of using a credit card, you will always have enough money for all your wants
c. Savings in the banks are not guaranteed, so keeping cash pays yourself
d. If you do not save for the future, then you may have to borrow money from someone and pay them interest.
What is d. if you do not save for the future, then you may have to borrow money from someone and pay them interest.
Many consumers' savings strategies involve putting money aside in ____. These are issued by a bank representing money placed into an account for a specified period of time. (6 months, one year, two year)
a. Mutual funds
b. Money market mutual fund
c. Savings bonds
d. Certificates of deposit (CD's)
What is d. Certificates of deposit (CD's)
Owning stock has one of the best rates of return of any investment; however, you must be willing to "ride the market" because it can be somewhat volatile. Which of the following is the best advice for a consumer seeking to invest in the stock market?
a. Hire a professional who will buy the best stock for you
b. Purchase stock in older, well-established companies
c. Buy large amounts of stock in a single corporation.
d. Purchase a variety of stocks and diversify your portfolio
What is d. Purchase a variety of stocks and diversify your portfolio
Interest rates and types of interest vary greatly from one account to another. Interest on savings can be computed in which two different ways?
a. Simple and compound
b. Principle and interest
c. Short term and long term
d. Annual and Variable
what is a. Simple and compound
How does the advice, "Don't put all your eggs in one basket" apply to savings and investing?
a. consumers should weigh the risks before they invest any money in the stock market.
b. people should consider diversifying in different types of savings and investments.
c. all forms of savings and investments are too risky
d. individuals should save at least 10% of their earnings
what is b. people should consider diversifying in different types of savings and investments.
The process of saving involves understanding the concept of ________, which is the "second-best" choice. In other words, it is what you would do if you decided not to save.
a. liquidity
b. interest
c. opportunity cost
d. risk of loss
What is c. opportunity cost
Retire people may have income from many sources. These might include rental property, inheritance or other investments. Whatever the source, it is important to plan for the future for all of the following reasons EXCEPT ________
a. life expectancy is longer than before
b. inflation may increase the costs of goods and services
c. tax responsibilities may increase over time
d. government programs will always be a "safety net" for retired people's needs
what is d. government programs will always be a "safety net" for retired people's needs
IRAs provide another option for retirement planning. Most IRAs are invested in ______ which have lower risk than other retirement options
a. mutual funds
b. savings account
c. social security
d. life insurance
what is a. mutual funds
The Rule of 72 is an easy way for you to discover how long it will take your money to double using _____ interest. This is a big factor in making your savings grow. The longer the money is invested, the more interest you can receive.
a. annual percentage
b. compound
c. simple
d. variable
what is b. compound
Many financial advisors claim that consumers should consider putting their savings into both fixed income and equity classes. This is because ______
a. of the potential that an invested business may fail to make a profit
b. there is less risk in equity classes of investment
c. fraud is legal and frequent with equity
d. taxes will continue to grow and consume an individuals income.
What is a. of the potential that an invested business may fail to make a profit