AnswersPersonal Finance - EL3403Investing

Understanding Checking and Debit Accounts Answers

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The image shows Alex’s investments in one year. Investments during One Year

Question illustration
A
He should have invested in a commodity instead of a stock.
B
He would have lost more with a higher-risk investment.
C
He most likely would have benefited by diversifying.
D
He most likely would have profited by buying more of the stock.
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retirementvacationsrainy daysemergencies

A
retirement
B
vacations
C
rainy days
D
emergencies
63

What is the definition of liquidity?

A
how difficult it is to maximize returns on investments
B
how much money someone has in a savings account
C
how easily an investment can be exchanged for cash
D
how much income someone has to invest each year
64

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.
65

Why is it risky to invest in a commodity?

A
A commodity has little or no value as a long-term investment.
B
Commodity stocks cannot be traded after you purchase them.
C
The commodity's price might drop significantly very quickly.
D
The investment will tie up your money for more than one year.
66

When planning a budget, the biggest consideration should be the

A
the monthly savings amount.
B
the total income available to spend.
C
the total housing or rent payments.
D
the monthly transportation cost.
67

The pie graph shows sources of income for people ages 65 and over in 2010.

Question illustration
A
largest source of income.
B
smallest source of income.
C
second largest source of income.
D
fourth largest source of income.
68

Which are common types of bonds that are currently issued? Check all that apply.

A
corporate bonds
B
equity bonds
C
municipal bonds
D
Treasury bills
E
Treasury notes
F
war bonds
69

What is the relationship between risk and return?

A
A higher risk often means a higher return.
B
A lower risk always means a higher return.
C
A higher risk often means a lower return.
D
A lower risk will always mean a lower return.
70

What is the definition of risk?

A
putting money into more than one investment
B
amount made in profit on an investment
C
using borrowed funds for an investment
D
possibility of losing money on an investment
71

Once stocks are on the market, which best explains how their prices are set?

A
Prices are controlled by the issuing company.
B
Prices are set by the financial market.
C
Prices follow economic trends.
D
Prices fluctuate on the basis of demand.
72

What is the first step in the decision-making process?

A
Take action.
B
Get information.
C
Form a decision.
D
Identify the choices.
73

Are the buying and selling of stocks centralized activities? Why or why not?

A
Yes, the New York Stock Exchange is the primary exchange for all the world’s most important trades.
B
No, people can buy stocks anywhere, and they do not need to go through a market.
C
Yes, the world’s stock markets are coordinated exchanges, and they are dependent on one another.
D
No, there are many stock markets around the world, and they are independent of one another.

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