AnswersPersonal Finance - EL3403Investing

Understanding Checking and Debit Accounts Answers

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21
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What is the major difference between a nationwide bank and a community bank?

A
The community bank offers more services.
B
The nationwide bank services only local customers.
C
The nationwide bank has fewer branches.
D
The community bank services only local customers.
22
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How do bonds generate income for investors?

A
Bonds depreciate in value.
B
Bonds protect investors from bankruptcy.
C
Bonds pay interest to the bank that sold the bond.
D
Bonds pay a specified amount to the investor at maturity.
23

In which situation would a savings bond be the best investment to earn interest?

A
if you need access to your cash quickly
B
if you are saving each month for a new car
C
if you are putting aside a chunk of money to purchase a house in five years
D
saving to pay a tax bill in four months
24

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.
25

Someone who diversifies investments is more likely to

A
increase both risks and returns.
B
offset their losses with gains.
C
reduce both risks and returns.
D
increase liquidity of investments.
26

Marlene has decided to save $3,500 so that she can attend the nearby community college. Which step in the decision process should Marlene take?

A
Take action.
B
Gather information.
C
Evaluate results.
D
Evaluate alternatives.
27

If a company pays dividends on a stock, does that mean that the stock has appreciated in value? Why or why not?

A
Yes, the payment of dividends indicates that a stock’s value has increased.
B
No, the payment of dividends indicates that a company has earned profits.
C
Yes, the payment of dividends indicates that a company’s assets have grown.
D
No, the payment of dividends indicates that a company can repay investors.
28

What can be traded in a commodities market?

A
stock
B
bonds
C
oil
D
debt
29

The image shows Gale's investments during one year. Investments during One Year

Question illustration
A
If she had purchased only the stock and had not diversified her investments, she would have lost money.
B
If she had diversified her investments further, her profits would have been considerably larger.
C
If she had put money in her savings account only and had not diversified, her profits would grow.
D
If she had diversified her investments further, she would have reduced her risk but made less of a profit.
30

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.
31

most

p
paying taxes
h
hiring workers
r
repaying investors
p
producing goods
d
distributing goods
b
buying materials
32

Which best describes what generally occurs in financial markets?

A
Debt and loans are traded.
B
Assets are traded.
C
Commodities are traded.
D
Shares are traded.
33

Which describes an investor’s primary goal of buying a loan?

A
to grow a business
B
to earn a profit off the interest
C
to bolster the economy
D
to provide capital to a business
34

What is the purpose of comparison shopping?

A
ensuring you are not buying out of emotion
B
attempting to find the best deal on a product
C
determining whether you truly need a product
D
reading reviews to make sure a product is good
35

Which best describes what a market index does?

A
An index measures market performance.
B
An index measures economic trends.
C
An index measures growth.
D
An index measures the performance of a single stock.
36

What is one benefit of purchasing saving bonds?

A
Saving bonds are purchased from the government and guaranteed to increase in value.
B
Saving bonds are purchased from commercial banks and guaranteed to increase in value.
C
Saving bonds are short term investments backed by the government to protect from loss.
D
Saving bonds are long term investments created to help first time home buyers obtain a mortgage.
37

Which types of investments are securities?

A
both debt and equity
B
debt only
C
equity only
D
neither debt nor equity
38

Which investment has the least liquidity?

A
mutual fund
B
house
C
checking account
D
small business
39

Bonds are considered to offer a guaranteed return, as they must be honored by law, but which is still a potential risk that investors face?

A
The issuer may not raise enough capital.
B
The issuer could refuse to pay dividends.
C
The issuer could go bankrupt.
D
The issuer may not make a profit.
40

How is a savings account most useful?

A
for saving for a long time without withdrawing
B
for depositing and withdrawing money frequently
C
for using money for CDs and other investments
D
for using money in the near future but not right away

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