AnswersOK-Personal Financial Literacy S1 – EDGNTY-83861 26-27Unit Test

Unit Test — Unit test Answers

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1
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When discussing a loan, interest rates are expressed as a percentage of the

A
investment fees.
B
the principal.
C
the profit.
D
taxes owed.
2
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Which questions should Robert ask himself before investing the $10,000 he inherited? Select four options.

A
How am I protected as an investor?
B
Are my friends investing in a similar way?
C
What guarantees are in place so I make money?
D
What taxes will I have to pay on this investment?
E
How do the risks compare to the potential gains?
F
What are the chances that the investment will fail?
3

Which is an example of a short-term investment?

A
bonds
B
retirement funds
C
savings accounts
D
houses
4

How does time generally affect the risk of an investment?

A
Short-term investments are generally less risky than long-term investments.
B
Long-term investments are generally more risky than short-term investments.
C
Time has no effect on the risk of an investment.
D
Short-term investments are generally more risky than long-term investments.
5

Which of these affect real investment value? Check all that apply.

A
fees and expenses
B
inflation
C
nominal interest rate
D
pretax returns
E
taxes
6

Julie wants to buy a car and is deciding how she should invest her money. To best meet her needs, she should

A
keep her money in a checking account for easy access.
B
invest in US savings bonds because of its short term.
C
invest in a commodity because of its low risk.
D
keep her money in a savings account for easy access.
7

Changes in monetary policy occur when the Federal Reserve

A
adjusts business laws to affect the money supply.
B
changes taxation levels to affect the economy.
C
changes spending levels to affect the economy.
D
adjusts interest rates to affect the money supply.
8

Putting money into more than one kind of investment at a time is called

A
liquidity.
B
sunken cost.
C
diversification.
D
compound interest.
9

The chart shows the costs associated with the purchase of a new home.

Question illustration
A
cost of making repairs to the new home.
B
fees that must be paid to local schools.
C
costs associated with obtaining the loan.
D
fees assessed by the state or local government.
10

The graph shows the effect of inflation.Approximately how much of the initial investment’s value would be lost after 15 years at 3% inflation?

Question illustration
A
15%
B
20%
C
40%
D
50%
11

Which statement is true of the relationship between risk and return?

A
The greater the risk, the greater the potential return.
B
The relationship between risk and return is always the same.
C
The greater the risk, the lower the potential return.
D
The relationship depends on the individual investment.
12

A balloon payment mortgage makes the best sense for borrowers who are

A
fearful of taking risks when borrowing money.
B
planning on selling their homes before the term of the loan ends.
C
looking to avoid borrowing money from banks.
D
anticipating losing their jobs in the next few years.
13

The graph shows changes in interest rates since 1975.

Question illustration
A
Interest rates can go up and down.
B
Interest rates can only go down.
C
Interest rates can only go up.
D
Interest rates show little change over time.
14

What best explains the relationship between a borrower’s credit score and a down payment requirement?

A
Someone with a high credit score may be required to make a higher down payment.
B
Someone with a high credit score may be required to make a lower down payment.
C
Someone with a low credit score may be required to make a lower down payment.
D
Someone with a low credit score may not have to make a down payment.
15

Which aspect could have a positive impact on future salary in a job position?

A
The opportunity for advancement or promotion could result in higher pay.
B
The starting salary is very high, but the job outlook is poor.
C
The position offers more employee benefits than others like it.
D
The career choice requires less post-secondary education so less student loans are needed.
16

This graph shows US government revenue and expenditures between 1980 and 2010.

Question illustration
A
The government spends less than it receives year over year.
B
The government should produce more money to cover spending.
C
The government on average spends more than it collects.
D
The government needs to lower taxes to cover spending.
17

Iman has 48 months to save $18,000, the maximum amount he estimates his first year of college will cost. He does not want to depend on interest, and does not consider interest when determining his minimum monthly savings goal. What is the minimum amount he should save per month to achieve his goal?

A
$350.00
B
$375.00
C
$425.00
D
$450.00
18

Which characteristic is most important in determining an investment’s level of risk?

A
popularity
B
predictability
C
price
D
prominence
19

Which would be considered part of an employee’s salary?

A
amount of taxes that will be deducted each pay check
B
amount an employee can expect to earn in gratuities from customers
C
amount of money the employee will earn each month
D
amount of matching funds the employer will pay to a retirement account
20

A federal payroll tax that supports retired workers is

A
progressive tax.
B
sales tax.
C
corporate tax.
D
social security tax.

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