Econ Test 2

Question 1

2 ways to make money work for you

Answer 1

Savings and Investing

Question 2

$ set aside for a goal

Answer 2

Savings (low risk, low return)

Question 3

$ set aside for future income, benefits, or profits

Answer 3

Investments (high risk, high return)

Question 4

Relationship between time, money, interest, and their effect on earnings growth

Answer 4

Time Value of Money or Rate of Return

Question 5

Payment you receive for allowing a financial institution or corporation to use your money

Answer 5

Earned Interest

Question 6

Know Compounding and rule of 72

Answer 6

Rule of 72: Divide by interest rate and you get number of years, divide by years and you get the IR

Question 7

The reduction of investment risk by spending your invested dollars among several different investments

Answer 7

Diversification

Question 8

Price of borrowing $

Answer 8

Interest

Question 9

Types of income investments

Answer 9

Bonds, Savings, CDs, Money Market

Question 10

Types of growth investments

Answer 10

Real Estate, Stocks, Collectibles, Mutual Funds

Question 11

Loaning the government money, gains interest

Answer 11

Bonds

Question 12

Put $ into the bank and they loan it out, you gain interest

Answer 12

Savings

Question 13

Bond from a non government financial institution, higher iR than savings

Answer 13

CDs

Question 14

CDs

Answer 14

Certificates of Deposit

Question 15

Investments that represent ownership in a company

Answer 15

Stocks

Question 16

Investment expert

Answer 16

Fund Manager

Question 17

Pools money from several investors and uses the money to buy a particular type of investment, like stocks

Answer 17

Mutual Funds

Question 18

What is actually loaned/borrowed (NOT interest)

Answer 18

Principal

Question 19

Someone is willing to loan you money in exchange for a promise to pay it back, usually with interest

Answer 19

Credit

Question 20

Amount it costs you a year to use credit, expressed in percent rates

Answer 20

APR (annual percent rate)

Question 21

Uses of credit

Answer 21

Emergency money
 ability to buy now/pay later
safety
convenience 
earn benefits

Question 22

Where to get credit

Answer 22

Banks
credit unions
car dealership
the government

Question 23

credit history, a record of personal financial transactions

Answer 23

Credit Report (**Includes loans, payment history, accepted/denied loans, loan amounts)

Question 24

Compare and Contrast Savings and Investment

Answer 24

S: Low Return, high liquidity, low risk, guaranteed, short term
I: Higher Return, low liquidity, high risk, not guaranteed, for long term (like retirement)