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FREE SOCIAL STUDIES AND STUDY GAMES ABOUT
PERSONAL FINANCE-CH8 EXAM QUESTIONS
Actual Qs and Ans Expert-Verified Explanation
This Exam contains:
-Guarantee passing score -37 Questions and Answers -format set of multiple-choice -Expert-Verified Explanation
Question 1: An actively managed mutual fund is
Answer:
managed by a team or a manager who charges a fee
Question 2: The Rule of 72
Answer:
is a quick way to calculate the length of time it will take to double a sum of money Question 3: Allows you to earn money on the amount you saved and the interest you already earned.
Answer:
compound interest Question 4: Distribution of a portion of a company's earnings, decided by the board of directors to a class of its shareholders
Answer:
dividends
Question 5: A list of your investments
Answer:
portfolio Question 6: A savings account sold by an insurance company, designed to provide payments to the holder at specified intervals, usually after retirement.
Answer:
Annuity
Question 7: Why should you never borrow money and then invest it?
Answer:
it increases the risk of the investment. If you lose the money, you are still left with payments on it.Question 8: Long-term investments, properly diversified, include which type of mutual funds?
Answer:
Growth, growth and income, international, aggressive growth
Question 9: Index funds are popular because...
Answer:
they are diversified and low cost and perform like the market.
Question 10: Employee benefits packages
Answer:
are non-wage compensations provided to employees in addition to their normal wages or salaries
Question 11: Explain the risk-return ratio.
Answer:
this is used by investors to compare the expected returns of an investment to the amount of risk they take to get the returns. Usually the higher the risk, the higher the return.
Question 12: Explain how compound interest works
Answer:
it is interest paid on interest previously earned. This allows your investment to grow more quickly.
Question 13: Federal agency responsible for collecting taxes and for the interpretation and enforcement of the Internal Revenue Code
Answer:
Internal Revenue Service Question 14: Relationship of substantial reward compared to the amount of risk taken
Answer:
risk-return ratio Question 15: Securities that represent part ownership or equity in a corporation
Answer:
stocks
Question 16: How is the Rule of 72 calculated?
Answer:
Divide 72 by the expected interest rate Question 17: Savings accounts and money market accounts are most appropriate for
Answer:
Emergency funds and short term goals Question 18: Money markets are great for your emergency fund due to their liquidity and stability.
Answer:
true Question 19: A young investor willing to take moderate risk for above average growth would be most interested in
Answer:
mutual funds
Question 20: The reason people save and invest is to
Answer:
enable their money to make money
Question 21: Piece of ownership in a company, mutual fund or other investment
Answer:
share
Question 22: Piece of ownership in a company, mutual fund, or other investment
Answer:
share Question 23: Savings accounts and money market accounts are most appropriate for:
Answer:
Emergency funds and short-term goals Question 24: To ensure that some of your retirement savings will not be subject to income tax upon withdrawal, you would contribute to
Answer:
Roth IRA
Question 25: Why is it important to diversity your portfolio?
Answer:
It reduces risk; don't put all your eggs in one basket. If one investment does not do well, you have not lost everything.
Question 26: What is the relationship between risk and return?
Answer:
High risk = high return; low risk = low return Question 27: A retirement plan found in nonprofit organizations such as churches, hospitals, and schools.
Answer:
403B
Question 28: How is saving different than investing?
Answer:
Saving/money markets are good for short-term; investing is for long-term. Investing tries to make money; saving does not.
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