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1. | Why do people save?
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| a) to make future purchases, for emergencies, and for retirement
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| b) to provide funds for savings institutions to lend
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| c) to raise the standard of living in the United States
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| d) to allow business expansion, which increases income for consumers
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2. | Which of the following is a TRUE statement about passbook, statement, and money market deposit accounts?
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| a) Passbook and statement savings accounts generally offer higher interest than money market accounts.
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| b) Because it offers a high rate of interest, a money market deposit account does not offer checking.
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| c) The trade-off for having the easy availability of funds offered by the passbook and statement accounts is the high minimum-balance requirement.
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| d) The only difference between a passbook savings account and a statement savings account is the manner in which transactions are recorded.
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3. | Each of the following statements about time deposits is true EXCEPT _________
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| a) the longer it is to the maturity date, the higher the interest.
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| b) a CD with a maturity of 2 years would have a higher interest than one with a maturity of 1 year.
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| c) savers who decide to cash a time deposit before maturity pay a penalty.
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| d) time deposit accounts limit the number of checks that may be written against the account each month.
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4. | Stocks and bonds differ in each of the following ways EXCEPT __________
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| a) stocks represent ownership and bonds represent debt.
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| b) stocks do not have a fixed dividend rate; bonds pay a fixed rate of interest.
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| c) corporations are not required to issue stock; all corporations issue bonds.
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| d) unlike bonds, stocks do not have a maturity date.
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5. | Which of the following statements about investments in the stock and bond markets is NOT TRUE?
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| a) The 500 stocks tracked by Standard and Poor's may be used as the basis for an index fund.
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| b) A mutual fund is an investment company that pools money of many individuals to buy stock, bonds, or other investments.
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| c) A managed mutual fund is one in which the managers adjust the mix of stocks and move with the market in an attempt to generate the highest yield.
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| d) Money market funds use investor's money to buy stock in financial institutions.
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6. | Which statement about retirement plans is NOT TRUE?
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| a) The Keogh Plan allows corporate employees to save up to 15% of their income each year, up to a certain amount, and deduct that amount from their yearly taxable income.
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| b) Many individuals who are not self-employed have company retirement plans called pension plans that provide retirement income.
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| c) Individuals who earn less than $30,000 a year can invest up to $2,000 a year in a conventional IRA and deduct it from taxable income.
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| d) In the Roth IRA, individuals are allowed to invest $2,000 a year, but that amount is not tax deductible. Instead, the interest earned on the contributions to the Roth IRA is tax-free when they are withdrawn during retirement.
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7. | When developing a savings plan, ask yourself all of the following questions EXCEPT ___________
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| a) How are my friends saving?
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| b) What degree of risk am I willing to take?
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| c) How important is it to have cash readily available?
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| d) Will my standard of living at retirement depend largely on my accumulated savings?
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