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2.4.0.M1
Saving and Investing Unit Multiple Choice Test Bank
Total Points Earned
Name
22
Total Points Possible
Date
Percentage
Class
Directions: Circle the correct answer for each question. (1 point each)
Choose to Save
1. Kylee’s Personal Finance class When has been discussing the importance of understanding
liquidity and she is trying to explain the term to another student. Which statement is most
correct description of liquidity?
a. how quickly and easily an asset can be converted into cash
b. the amount of savings available
c. a measurement of how much a person or household owns once all debts have been
paid
d. the amount of money needed to pay for the necessities and comforts currently enjoyed
2. When taking advantage of the time value of money, which of the following is most likely to
result in the largest return?
a. Invest a large principal amount of money and then make no additional investments.
b. Invest as long as possible and at the highest interest rate possible.
c. Invest a small amount of money for a short period of time at the highest interest rate
possible.
d. Invest at a high interest rate because interest is the only factor that affects return.
3. Compound interest is best defined as:
a. Interest earned on the principal investment
b. Any form of interest earned from saving or investing
c. Earning interest on interest
d. The effect interest has on the total return on investment
4. Dylan is preparing a presentation about saving and the presentation rubric says that he must
include an explanation of compounding interest. Which of the following statements would
be the best one to include in his presentation to show that he understands compounding
interest?
a. interest earned on the principal investment
b. any form of interest earned from saving or investing
c. earning interest on interest
d. the effect interest has on the total return on investment
© Take Charge Today – August 2013 – Saving and Investing Multiple Choice Test Bank
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
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2.4.0.M1
5. When a goal has been set to save $100.00 a month for an emergency fund of $2000.00,
giving up food from the vending machine to achieve that goal is the:
a. opportunity cost
b. interest
c. specific part of the SMART goal
d. trade‐off
6. Which statement best reflects the philosophy of “pay yourself first”?
a. An individual should save whatever money is left over after paying monthly bills.
b. An individual should pay all fixed expenses before paying flexible expenses.
c. An individual should set aside a predetermined amount of money for saving before
using any of that money for spending.
d. An individual should spend money on the items and activities enjoyed in life before
paying any other expenses
© Take Charge Today – August 2013 – Saving and Investing Multiple Choice Test Bank
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
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2.4.0.M1
Savings Tools
7. In relation to the other options, how liquid is a savings account?
a. More liquid than cash
b. Less liquid than mutual funds
c. More liquid than a Certificate of Deposit
d. More liquid than a checking account
8. Hannah needs a savings tool to help her manage her everyday purchases. The savings tool
needs to be very liquid and accessible. Which of the following savings tools should Hannah
choose?
a. Certificate of deposit
b. Checking account
c. Money market deposit account
d. Any of the above savings tools would help Hannah
9. Which of the following statements correctly describes the security level of savings tools?
a. Savings tools are not secure because they have a high risk of losing money.
b. Savings tools are secure because they are protected by the U.S. government against loss.
c. Savings tools are very secure because there are not risks involved with saving or investing.
d. None of the above is true. It would be safer to keep the money at home in a shoe box.
10. Brett plans to save money toward purchasing a car. His co‐worker is telling him about a Money
Market Account he has that offers a tiered interest rate. What is Brett’s co‐worker talking
about?
a. The amount of money he earns depends on the balance, i.e. the higher the account balance
the higher the interest rate he would earn.
b. The amount of money he earns depends on the number of accounts he has at the
depository institution, i.e. the more accounts he has, the higher interest rate he will earn.
c. Brett’s co‐worker is talking about something that is illegal. A tiered account is promoted by
scam artists who trick people into investing money in hopes of earning higher rates over
time.
d. The rate of interest earned increases over time, i.e. leaving money in the account for 3
months would earn a lower interest rate than leaving money in the account for 12 months.
11. Which of the following is a feature of a certificate of deposit (CD)?
a. Funds deposited in a CD are held for a certain length of time.
b. Funds deposited in a CD have tiered interest rates.
c. Funds deposited in a CD are very liquid.
d. Funds deposited in a CD can be accessed via check or debit card.
12. Which of the following is a feature of a money market deposit account?
a. No minimum balance requirements
b. Unlimited transactions every month
c. Tiered interest rates
d. The money must remain in the account for a specific period of time
© Take Charge Today – August 2013 – Saving and Investing Multiple Choice Test Bank
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
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2.4.0.M1
The Fundamentals of Investing
13. Harris is concerned about the effects of inflation on his investment returns. Which statement
best describes inflation?
a. The rise in the general level of prices
b. The uncertainty about the return on an investment
c. The number of times something happens to money
d. The projected value of an investment at the end of a specified time frame
14. The most common relationship between risk and return in investing can be stated as:
a. higher risk indicates lower return
b. higher risk indicates higher return
c. lower risk indicates higher return
d. No relationship exists between risk and return
15. Elliot’s stock broker is suggesting that he consider investing in a diversified portfolio. A
diversified portfolio is desirable because it:
a. increases the risk/return ratio
b. limits investors choices to only one or two investment tools
c. indicates an investor is a good predictor of the return an investment will have
d. decreases risk by investing money in a variety of investment tools
16. Which of the following is not true in regards to investing in stock?
a. A stockholder owns a part of a company.
b. Depending upon the current market price, stockholders may pay different prices for the
same stock.
c. A stockholder may or may not receive a dividend.
d. A stockholder will always receive a profit when the stock is sold.
17. Conner wants to purchase stocks with the money he received from his tax return. Who would he
contact to make the transaction?
a. A brokerage firm
b. The New York Stock Exchange
c. A real estate agent
d. Conner should complete this transaction on his own
18. Which statement is TRUE of mutual funds?
a. Mututal Funds are speculative investments
b. Mutual Funds are diversified investments
c. Mutual Funds are a form of real estate investment
d. Mutual funds are superior purhcasing to a single stock
19. A bond is:
a. A type of debt that a company issues to investors for a specified period of time.
b. A share of ownership in a company.
c. A type of investment that is only offered by depository institutions.
d. A type of investment that has the potential for significant fluctuations over a short period
of time.
© Take Charge Today – August 2013 – Saving and Investing Multiple Choice Test Bank
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
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2.4.0.M1
20. Alisa is looking for an investment that is structured to have tax benefits. She should look for
information on:
a. Tax rated bonds
b. Speculative investments
c. Index funds
d. Tax‐advantaged investements
21. It is best to have the rate of return on an investment
a. Lower, in order to minimze taxes
b. Lower, in order ot minimize risk
c. Higher, to maintain purchasing power
d. Higher, to minimize risk
than the rate of inflation.
22. Which of the following statements is true in regards to paying taxes on investments?
a. Since investments are considered unearned income, taxes do not have to be paid on
earnings.
b. Taxes are often owed on profits generated from investments.
c. Taxes only have to be paid on employer‐sponsored investment accounts.
d. Taxes are always paid on investments either when the money is placed in the investment or
removed from the investment.
© Take Charge Today – Revised August 2013 – Saving and Investing Unit Multiple Choice Test Bank
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
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2.4.0.C1
Saving and Investing Multiple Choice Test Bank
Answer Key
© Take Charge Today – Revised August 2013 – Saving and Investing Unit Multiple Choice Test Bank
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona