FINANCIAL LITERACY STANDARD 5
TEST AND ANSWERS.
Why is savings and investing important? - Answers-It is important because it gives
money for future use and to grow your wealth overtime.
What is inflation? - Answers-A rise in the general or average price level of all the goods
and services produced in an economy
In order to meet long term financial goals, what is your best option for planning your
future? - Answers-Invest
What is default risk? - Answers-The potential that the bond issuer will not pay the
interest or return your money when it matures
How are stocks and bonds similar? - Answers-If something happens to that
corporation, you can lose most, or all, of your investment.
How is compound interest calculated? - Answers-Compound Interest is calculated on
the money that you invest or loan to someone, plus any interest that they have already
paid you
T/F - You need a lot of money to start saving money - Answers-False
What is principal? - Answers-The original amount of loan
What is liquidity? - Answers-The quality of an asset that permits it to be converted
quickly into cash without loss of value. For example, a checking account is more liquid
than real estate.
What is opportunity cost? - Answers-The value of the second-best alternative that a
person gives up when making one choice instead of another.
What are money market mutual funds? - Answers-A fund restricted by law to investing
in the short-term
money market. MMMFs provide low risk and low returns, but they maintain their
investment value.
How could you best describe diversifying a portfolio? - Answers-Buying stocks from
more than one company
What should you do if you have a low risk tolerance? - Answers-You should do both the
stock market and fixed income and savings produce to balance for your investment
portfolio. This balance is often called diversification
TEST AND ANSWERS.
Why is savings and investing important? - Answers-It is important because it gives
money for future use and to grow your wealth overtime.
What is inflation? - Answers-A rise in the general or average price level of all the goods
and services produced in an economy
In order to meet long term financial goals, what is your best option for planning your
future? - Answers-Invest
What is default risk? - Answers-The potential that the bond issuer will not pay the
interest or return your money when it matures
How are stocks and bonds similar? - Answers-If something happens to that
corporation, you can lose most, or all, of your investment.
How is compound interest calculated? - Answers-Compound Interest is calculated on
the money that you invest or loan to someone, plus any interest that they have already
paid you
T/F - You need a lot of money to start saving money - Answers-False
What is principal? - Answers-The original amount of loan
What is liquidity? - Answers-The quality of an asset that permits it to be converted
quickly into cash without loss of value. For example, a checking account is more liquid
than real estate.
What is opportunity cost? - Answers-The value of the second-best alternative that a
person gives up when making one choice instead of another.
What are money market mutual funds? - Answers-A fund restricted by law to investing
in the short-term
money market. MMMFs provide low risk and low returns, but they maintain their
investment value.
How could you best describe diversifying a portfolio? - Answers-Buying stocks from
more than one company
What should you do if you have a low risk tolerance? - Answers-You should do both the
stock market and fixed income and savings produce to balance for your investment
portfolio. This balance is often called diversification
