Investing
What are the three most important criteria to consider when investing?
risk, rate of return, liquidity
A whole life insurance policy offers protection:
during the lifetime of the insured and builds cash value
Who generally benefits from a loan transaction?
the lender only
the borrower only
both the borrower and the lender
neither the borrower nor the lender
The first three steps of economic decision making are to:
define the problem, list alternatives, and state criteria
The U.S. Bureau of Labor Statistics reveals that the fastest growing jobs will require which level of educational training?
an associate's degree or higher
What is the general relationship between risk and reward?
the higher the risk, the higher the potential reward
Which is the best description of collision coverage in an auto insurance policy?
It provides income when the policy holder is unable to work after an accident.
It covers the cost of damage to an auto as a result of fire, theft, or storms.
It covers the cost of property damage or injuries to others caused by the policyholder.
It provides for the repair and re-placement of the policyholder’s car if it is damaged in an accident.
It provides for the repair and re-placement of the policyholder’s car if it is damaged in an accident.
Using a debit card to purchase a good is most similar to using a:
loan.
check.
credit card.
money market account.
check
Jamal values three goods in this order: (1) a CD player; (2) a computer game; and (3) a sweatshirt. Each item costs $50. Jamal bought the CD player, what he wanted the most. His opportunity cost is the:
sweatshirt.
CD player.
computer game.
sweatshirt and the computer game.
sweatshirt
A typical characteristic of entrepreneurs is that they:
are willing to take risks
How do you calculate the real rate of return on an investment?
subtract the rate of inflation from the nominal rate of return
subtract the nominal rate of return from the rate of inflation
subtract the nominal rate of return from the annual rate of return
subtract the annual rate of return from the nominal rate of return
subtract the rate of inflation from the nominal rate of return
Which type of insurance protects a person from loss from lawsuits?
liability
casuality
term life
collision
liability
A positive net worth means that:
income is less than saving.
assets are less than liabilities.
income is greater than saving.
assets are greater than liabilities.
assets are greater than liabilities
Which will result from an increase in the demand for software programmers?
a decrease in the price of software
a decrease in the supply of software
an increase in the wage of software programmers
an increase in unemployed software programmers
an increase in the wage of software programmers
A key advantage of getting credit is that it can help people:
sell assets.
increase their net worth.
reduce risk when investing in stocks.
buy a good or service today and pay for it later.
buy a good or service today and pay for it later.
Common stock provides the shareholder with:
ownership in a company.
a set interest rate per year.
guaranteed annual dividends.
insured protection on investment.
ownership in a company
Suzy backs her car into a metal fence, causing $500 of damage to her car. Suzy has an auto insurance policy with a $200 deductible. To get her car fixed, how much will her auto insurance company pay?
$0
$200
$300
$500
$300
Charlie opens a savings account and deposits $500. If the savings account has a fixed annual interest rate of 5 percent, and he makes no additional deposits or withdrawals, what amount will Charlie have in his savings account at the end of two years?
exactly $505
exactly $550
less than $550
more than $550
more than $550
Which is true about most millionaires?
They inherit most of their wealth.
They work more than 40 hours a week.
They work in glamorous jobs like sports or entertainment.
They avoid investing in the stock market due to its riskiness.
They work more than 40 hours a week
Which strategy is most likely to improve most people’s financial situation over a lifetime?
using credit to spend more than a person earns
making financial decisions quickly based on intuition
saving early in life when a person begins earning an income
gaining work experience early instead of continuing in school
saving early in life when a person begins earning an income
real estate
mutual fund
savings account
individual stocks
real estate
Which is the best description of comprehensive coverage in an auto insurance policy?
It covers the cost of damage to an auto as a result of fire, theft, or storm.
It provides income over a specified period when the policyholder is unable to work.
It covers the cost of property damage or injuries to others caused by the policyholder.
It provides for the repair and replacement of the policyholder’s auto if it is damaged in an accident.
It covers the cost of damage to an auto as a result of fire, theft, or storm.
Which type of financial institution typically charges the highest interest rates for loans?
credit unions
commercial banks
savings and loans
payday loan companies
payday loan companies
One consequence of scarcity is that:
there is full employment of resources.
the production of goods and services is constant.
people have to make choices among alternatives.
products which are plentiful have relatively high prices.
people have to make choices among alternatives
Some people choose to stop attending high school before graduation. What is the opportunity cost to the individual of dropping out of high school?
The lower income earned in the job market.
The lower interest rates one is charged for credit.
The higher taxes one pays for leaving school early.
The payments made to companies hiring drop-outs.
the lower income earned in the job market