Principles of Investment Answers

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1
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The type of credit people are most likely to use for small purchases during their lifetime is

A
a credit card.
B
a personal loan.
C
an auto loan.
D
a mortgage.
2
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Which activity is done in Step 2 of comparison shopping?

A
Research a product.
B
Assess the purchase objectively.
C
Compare prices and features.
D
Buy a product.
3

Read the scenario.Raoul has just been promoted to a supervisor’s position, which is a steady job. He likes to enjoy life, take vacations, and change things up every now and then. That’s why he will not have a lot of extra money to spend on repairs and maintenance on his car.

A
buy a used car.
B
lease a used car.
C
buy a new car.
D
lease a new car.
4

At what point does buying in bulk stop being a wise spending choice?

A
when the consumer has a lot of space to store bulk items
B
when costs rise too quickly due to demand
C
when bulk items are not on sale anymore
D
when the consumer buys more than is needed
5

Read the scenario.Brad has a steady job, earns a solid income, and plans to live in a nearby city for the long term. He is looking to purchase both a car and a place to live, and he is very interested in building up equity and credit.

A
buying both a car and a home
B
leasing both a car and home
C
buying a car and leasing a home
D
leasing a car and buying a home
6

The point at which it is no longer advantageous to buy in bulk is known as marginal

A
cost.
B
tipping.
C
benefit.
D
error.
7

What best determines whether a borrower’s interest rate on an adjustable rate loan goes up or down?

A
a fixed interest rate
B
a bank's finances
C
a market's condition
D
a person's finances
8

A monthly fixed rate mortgage payment

A
could change.
B
never changes.
C
increases annually.
D
decreases annually.
9

Frank is worried about identity theft. He does not like to give access to his checking account to anyone but the bank. What is the best option for him to pay his bills?

A
Frank should telephone in his payment to the company.
B
Frank should pay his bill online.
C
Frank should set up automatic withdrawals for the company he is paying.
D
Frank should mail a check to the company.
10

Veronique and Lily each bought a piece of luggage that had the same price in different stores. The table below shows how they will pay for the item. Payment for PurchasesNamePayment TypePayment Amount (Including Finance Charges)Number of Months to Pay for ItemVeroniqueStore financed$2510LilyCredit card$357Who made the better financial decision and why?

A
Veronique because her payments are lower.
B
Veronique because her final cost, including finance charges, is less than Lily’s.
C
Lily because she is paying off her purchase sooner.
D
Lily because her final cost, including finance charges, is less than Veronique’s.
11

Barbara has $70.00 in her pocket and a $20 gift card. Which purchase will she be able to make without having to use her credit card?

A
a portable radio for $65.95 and speakers for $29.99
B
five books for $18.95 each
C
headphones for $25.99 and eight CDs for 8.99 each
D
six puzzles for $11.99 each and a board game for $15.89
12

Mr. and Mrs. Atoll are planning a party for 10 people and want to make sure they have enough soda for everyone to have two bottles. Which of the following makes the most economic sense?

A
20 bottles of soda at $1.50 each
B
4 six-packs of soda at $5.00 each
C
one case of 24 sodas at $18.50
D
two cases of 24 sodas at $18.50 each
13

Shondra is thinking of making payments for her laptop by setting up automatic withdrawals with the store. What must Shondra consider before she decides to pay with automatic withdrawals?

A
Shondra should be sure she will remember to call the store each month to make the payment.
B
Shondra should check her credit history to be sure she has a good credit score.
C
Shondra should be sure she will have enough in her account to be able to make the monthly payments.
D
Shondra should consult with a credit counseling service.
14

The chart describes how four of Susan’s friends handle their money.Handling MoneyPersonDescription of SpendingSylviaShe uses her whole paycheck to buy food and necessities and pay the minimum amount on her bills each month. Then, she buys new clothes and pays for them with a credit card.NancyShe uses her whole paycheck to buy food and necessities and then takes a trip each month, which she pays for by adding to a personal loan with her credit union.FionaShe buys food and necessities and pays more than the minimum due on her bills each month. She goes out with her friends using some of the money that is left over in her checking account.UliShe buys food and necessities and pays the minimum amount on her bills each month. She goes out with her friends using the money that is left over in her savings.Which person is most creditworthy?

A
Nancy
B
Sylvia
C
Fiona
D
Uli
15

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16

The chart describes four situations involving financial responsibility.Financial ResponsibilityPersonFinancial DecisionsHallieHas multiple loans at the same timeHaydenHas more income than the amount of debtAlisonMade payments less than the minimum amount dueJoelMade late payments several times before the bill was paidWhich person is financially responsible?

A
Hallie
B
Hayden
C
Alison
D
Joel
17

Which payment option provides consistency in on-time bill payment?

A
mailing a check
B
making a payment by telephone
C
submitting an online payment
D
automatic withdrawal
18

Anastasia makes a good salary but wants to be sure she has good credit so she can buy a condominium when she has saved enough money for a down payment on a mortgage. What is the best thing she can do to improve her creditworthiness?

A
She should take out more debt to improve her credit score.
B
She should pay down her student loan and credit card debt.
C
She should apply for more credit cards to improve her credit history.
D
She should get a second job to make more money.
19

Which describes an example of using unsecured credit?

A
Someone buys new gutters for a home with a credit card.
B
Someone buys a new vehicle with a loan from a car dealer.
C
Someone buys a new home with a mortgage from a bank.
D
Someone buys a new boat with a loan from a boat dealer.
20

Which is a long-term consequence of making late payments on your bills?

A
It will be harder to secure a new loan at a low rate.
B
The balance in your checking account will be negative.
C
There will be a late fee.
D
The number of payments will increase.

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