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Financial Literacy Chapters 1-4 Review Flashcards | StudBud
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Financial Literacy Chapters 1-4 Review
Financial Literacy Chapters 1-4 Review
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1
Throughout history, why were gold and silver the preferred kinds of commodity money?
They had all six of the main characteristics of money.
They were guaranteed by the full faith and credit of the government.
They were easier to transport than banknotes.
They could be used not only for money, but also for food.
2
The six main characteristics of money are acceptability, portability, divisibility, uniformity AND
abundance and solubility
scarcity and durability
fragility and profusion
inflexibility and inconsistency
3
What should you assume when investing?
Assume a conservative rate of return. Expect the worst. Hope for the best.
Assume an aggressive rate of return because the market guarantees it.
4
Which of the following in NOT considered a historical example of money?
Pebbles
Silver
Salt
Gold
5
True or False: A Public company has shares that can be purchased on the stock exchange
True
False
6
The Dow Jones Industrial Average and the S&P 500 are both examples of
Brokerage Firms
Mutual Funds
Market Indexes
Stock Markets
7
Imagine that your favorite sports player was arrested for betting on games. You cannot believe it. This an example of
Overconfidence Bias
Confirmation Bias
Halo Effect
Sunk Cost Fallacy
8
What strategy minimizes risk to investors by using a variety of securities?
Diversification
Dollar Cost Average
Invest over Time
Time
9
Which of the following is a card issued by a bank that customers use to pay with money from a checking account?
Prepaid Card
Debit Card
Credit Card
Payroll Card
10
What tool would provide you with a glimpse of a stock's annual performance?
P/E Ratio
Previous Close Price
Market Capitalization
52-Week Range
11
What is the best strategy to make sure you put aside money in savings?
Pay yourself first and include savings as a part of your monthly budget.
Put aside what you have in your pockets the day before payday.
Save whenever you feel like you have a bit of extra cash.
Pay all your bills first, and save what is left over.
12
T/F: Job offers usually include information about your salary AND benefits like what healthcare & insurance options
False
True
13
Why is it challenging to match your investing decisions with how the stock market is performing?
It is hard to predict trends
The stock market is usually in a bear market for a specific time period
The stock market is usually in a bull market for a specific time period
14
Currency must be ___________ to both the buyer and the seller.
portable
acceptable
durable
divisible
15
True or False: Risk is inherent in investing
True
False
16
True or false: Investments are typically liquid
False
True
17
What is default risk?
The risk that the company/government is not able to make interest payments
The risk that the company or government is unable to pay back the investor.
The risk that the investor is not able to pay the face value of the bond
The risk that the investor demands the value of the bond before maturity
18
Which of the following are considered set it and forget it funds?
Index Funds
Exchange Traded Funds
Mutual Funds
Target Date Index Funds
19
Which of the following is issued by a bank/store/business, that is used to borrow money to buy goods that will be repaid
Checking account
Cash
Check
Credit
20
T/F: An Emergency Fund is a financial safety net for unexpected expenses and should be stored in a savings account.
True
False
21
The concept of compounding implies what is most important?
A good stock broker
Investing at a younger age
Investing in a conservative way
Investing more as you approach retirement
22
In the 50/30/20 method of budgeting, what percent of your money should be spent on needs?
100%
20%
50%
30%
23
What is the definition of net worth?
extra money left in your budget
assets minus liabilities
profits minus losses
income minus expenses
24
What is cognitive bias?
An error in the matrix
A glitch in fortnite
The fear of missing out
A systematic error in thinking
25
When you purchase a stock you become a...
A stockholder
A board member
A shareholder
An executive member
26
Economics is often defined as the study of how people choose to
analyze the benefits and consequences of their decisions.
measure efficiency with the production of luxury goods.
sell goods and services that are produced domestically.
use their limited resources to satisfy their unlimited wants.
27
Which payment method creates a debt that you have to pay back later?
Credit Card
Gift Card
Prepaid Card
Debit Card
28
Todd wants to open up a basic savings account. He should go to a
An investment bank
An asset management company
An insurance company
A comercial bank
29
Which of these is a variable expense?
Rent
House Payment (mortgage payment)
Insurance
Electricity Bill
30
You consider the costs and benefits between seeing your friends and doing homework. This is an example of
a scarcity-tradeoff idea.
a cost-benefit analysis.
the no-free-lunch theory.
the invisible hand principle.
31
T/F: Grants, loans, and scholarships are all free money to help pay for college that you do not have to pay back
false
true
32
T/F: When you put money in a bank, it is guaranteed and insured up to $250,000.
false
true
33
Which of the following terms summarizes the ease at which assets can be converted to cash?
Risk
Liquidity
Interest
Savings
34
T/F: Financial Literacy is the ability to understand and effectively use various skills including budgeting, saving etc.
True
False
35
Two ways that investors make money on stocks are capital gains and _____
Dividend Payments
Capital Gains Taxes
Tax payments
diversification
36
Investors use these as a way to invest in multiple companies and minimize risk
Mutual Funds
Stocks
Bonds
Commodities
37
Which of these earns more money over time?
Compound interest
Simple interest
38
Money functions as
a medium of exchange.
all of the above.
a standard of value.
a store of value.
39
The objective of investing is to
create an emergency fund
Have a safe and reliable fund
minimize your exposure to risk
achieve a long-term financial success
40
Which of these best describes a budget?
A list of things you want to buy
A list of goals for the year
A prediction of how much money you will make
An estimate of income and expenses over a set period of time
41
True or False: Active investing has much lower fees compared to passive investing
False
True
42
People that learn from and accept constructive criticism know that it is possible to learn from mistakes. They exhibit..
Consideration of multiple perspectives
Awareness of their bias
Growth Mindset
Consideration of other factors
43
A riskier bond usually comes from a corporation that has a ________ credit rating.
Low
High
44
The metaphor of the invisible hand explains how
government regulation and interference greatly benefits the economy.
the economy runs efficiently with or without government interference.
a person's self-interested actions contribute to an unhealthy economy.
an individual's pursuit for self-interest promotes society's well-being.
45
Who manages a mutual fund?
Mr. Chase
The Portfolio Manager
The Bank
The Investor
46
What adjectives would best describe a BULL market?
Pessimistic and Negative
Optimistic and Postive
