Finance and Investing Final Exam
UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Why do we save? - Correct answers✔✔To accumulate money, Investing
Investing - Correct answers✔✔Committing money to make a profit over time
Budget - Correct answers✔✔A plan that helps you save money and see where your money is
being spent.
Simple Interest - Correct answers✔✔Calculated based only on the money you deposit.
Compound Interest - Correct answers✔✔Calculated based on the entire account balance,
including prior interest paid.
Stocks - Correct answers✔✔A share in the ownership of a company. You become one of many
owners (shareholders) of a company, and you have claim to everything the company owns. Each
shareholder gets one vote per share to elect the board of directors.
What is the importance of being a shareholder? - Correct answers✔✔You are entitled to a
portion of the company's profits and have a claim on assets.
Dividends - Correct answers✔✔A distribution of a portion of a company's earnings, decided by
the board of directors, to a class of its shareholders.
, The importance of stock ownership? - Correct answers✔✔Your claim on assets and earnings.
Limited Liability. You are not personally liable if the company is not able to pay its debts.
Why would a company issue stock? - Correct answers✔✔To raise money. It's also known as
equity financing. Companies do not have to make interest payments or pay these back.
IPO - Correct answers✔✔Initial Public Offering. This is the first sale of a stock.
How does a stock holder make money? - Correct answers✔✔Dividends, Appreciation in the
stock.
Mutual Fund - Correct answers✔✔A collection of stocks, bonds, and other securities owned by a
group of investors and managed by a professional investment advisory firm. This investment
adviser collects money from many investors and invests the pool of money for all of them.
Advantages of Mutual Funds - Correct answers✔✔Provide professional management. Offers
diversification. It often invests in one hundred or more securities.
Coupon Bonds - Correct answers✔✔Pays interest every 6 months. For example, a face value of a
bond could be $10,000.00, and it pays interest of 5%. You would receive $250 every 6 months.
Zero Coupon Bonds - Correct answers✔✔Has a reduced face value. For example, the face value
of a bond is $1,000.00, but you pay $500.00 for it. Over a period of time the bond is worth
$1,000.00.
Government Bonds - Correct answers✔✔Used for deficit spending. It's a treasury bond. These
bonds are backed by the government and are federal tax exempt. The money from these bonds
may be used to do things such as improve roads.
UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Why do we save? - Correct answers✔✔To accumulate money, Investing
Investing - Correct answers✔✔Committing money to make a profit over time
Budget - Correct answers✔✔A plan that helps you save money and see where your money is
being spent.
Simple Interest - Correct answers✔✔Calculated based only on the money you deposit.
Compound Interest - Correct answers✔✔Calculated based on the entire account balance,
including prior interest paid.
Stocks - Correct answers✔✔A share in the ownership of a company. You become one of many
owners (shareholders) of a company, and you have claim to everything the company owns. Each
shareholder gets one vote per share to elect the board of directors.
What is the importance of being a shareholder? - Correct answers✔✔You are entitled to a
portion of the company's profits and have a claim on assets.
Dividends - Correct answers✔✔A distribution of a portion of a company's earnings, decided by
the board of directors, to a class of its shareholders.
, The importance of stock ownership? - Correct answers✔✔Your claim on assets and earnings.
Limited Liability. You are not personally liable if the company is not able to pay its debts.
Why would a company issue stock? - Correct answers✔✔To raise money. It's also known as
equity financing. Companies do not have to make interest payments or pay these back.
IPO - Correct answers✔✔Initial Public Offering. This is the first sale of a stock.
How does a stock holder make money? - Correct answers✔✔Dividends, Appreciation in the
stock.
Mutual Fund - Correct answers✔✔A collection of stocks, bonds, and other securities owned by a
group of investors and managed by a professional investment advisory firm. This investment
adviser collects money from many investors and invests the pool of money for all of them.
Advantages of Mutual Funds - Correct answers✔✔Provide professional management. Offers
diversification. It often invests in one hundred or more securities.
Coupon Bonds - Correct answers✔✔Pays interest every 6 months. For example, a face value of a
bond could be $10,000.00, and it pays interest of 5%. You would receive $250 every 6 months.
Zero Coupon Bonds - Correct answers✔✔Has a reduced face value. For example, the face value
of a bond is $1,000.00, but you pay $500.00 for it. Over a period of time the bond is worth
$1,000.00.
Government Bonds - Correct answers✔✔Used for deficit spending. It's a treasury bond. These
bonds are backed by the government and are federal tax exempt. The money from these bonds
may be used to do things such as improve roads.
