Saving and Investing Standard 5Test Review

If you need to save for a vacation, where should you put

your money?

Savings Account

Who backs government savings bonds?

U.S. Government

How much risk is involved when you purchase a government

savings bond?

Little or no default risk

What type of risk is involved in purchasing stocks?

High Risk

What is a good investment for long-term goals?

Stocks

_____ is how easy it is to turn an item into cash without losing any

money.

Liquidity

What is the potential that you will not get your money back

once it is invested

Default Risk

What is one of the best options to put aside money for long-term

goals?

A mutual fund

Why is a mutual fund a good option to put your money in for

long-term goals?

It is diversified

What is the original amount of money deposited for investing?

Principal

Investing in a mutual fund is good for someone with a

Low-risk tolerance

What shows past performance and how it might do in the

future?

Average Rate of Return

How much money will you have at the end of three years if your principal is $50 and your interest

rate is 10%? (simple interest)

$50 * 10% = $5$50 * 10% = $5$50 * 10% = $5

$50 + $5 + $5 + $5 = $65

Which is more liquid?Money in a savings account

orMoney invested in real estate

Money in a savings account

Which form of interest provides the greatest return?

compound

Buying stocks in several different companies is known as

Diversifying a portfolio

True or FalseLow interest rates decrease the

incentive to save.

True

True/FalseA savings account is best for meeting short-term goals.

True

True/FalseIt is better to wait until interest rates are high to start saving.

False

True/FalseInvesting tends to have a higher

risk than savings, resulting in potentially higher rates of return.

True

What is an overall increase in prices?

inflation

What would increase the amount of time needed to double your

money?

Low Interest Rates

What are designed to provide higher rates of return than

savings accounts as the money is invested in very short-term

investments with a low risk?

Money Market Mutual Funds

What is an easy way to determine how long it will take

your money to double using compound interest?

The Rule of 72

True/FalseTaking the time to review your

investments and make adjustments in your portfolio can

be an expensive and time consuming process.

False

True/FalseTaking the time to review your

investments and make adjustments in your portfolio is just as important as reviewing

your personal and financial goals.

True

Deciding whether to go to a concert or to save illustrates

Opportunity Cost

What has a relatively high level of risk?

Stocks and Bonds

What type of interest is calculated as principal plus any interest they have already paid

you?

Compound

True/FalseSavings and investing is only for

wealthy people.

False

True/FalseSavings is only for people with

high levels of income and investing is for people with

limited income.

False

True/FalseSavings and investing is

important for people of all income levels.

True

True/FalseSavings is only for people with limited income and investing if for people with high levels of

income.

False