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Study Guides > Unit 4 > Flashcards

Unit 4 Flashcards

1
Q

You decide to open a savings account, and notice a sign in your bank that indicates deposits are FDIC insured. What protection does that give you?

A

If the bank fails, your deposits are protected up to $100,000

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2
Q

An example of blue chip stock might be…

A

A large, well-known company traded on the NYSE

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3
Q

Since bonds are considered amount the safest investments, you would expect that they would…

A

Have low interest rates

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4
Q

What condition is necessary for a fiat money system to work?

A

The government must control the money supply

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5
Q

Why is representative money more useful than commodity money?

A

Representative money is portable, durable, divisible, and acceptable. It can also be exchanged for something else of value

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6
Q

To finance the building of a new police station, a local government is most likely to issue a…

A

Municipal bond

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7
Q

In June, Leslie wins a cash prize of $2,000. She plans to use this money to pay her tuition bill in September. Leslie puts this money in a savings account because her main priority is…

A

Liquidity, since she’ll need to use he money in a short term

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8
Q

You are a financial advisor whose client is concerned about losing his investment if a company goes out of business. You advise him to buy…

A

Preferred stock

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9
Q

What did the Federalists believe about banking?

A

They believed that a centralized banking system was necessary

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10
Q

Near money includes…

A

Deposits in savings account and money market mutual funds

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11
Q

Erin borrowed $18,000 to buy a car. Her loan will be paid off in 5 years. By the time that she pays off the loan, she will have made $20,327 in payments. Why did she have to pay $2,327 in payments. Why did she have to pay $2,327 more than the price of the car?

A

She had to pay unrest of $2,327 for the privilege of borrowing the principal of $18,000

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12
Q

All of the following are low-risk investments EXCEPT…

A

Junk bonds

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13
Q

Your friend Jorge has just inherited $1,000 and would like to invest the money in the stock market. You suggest that he…

A

Contact a brokerage firm, who will put him in touch with a stockbroker

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14
Q

What happens when you make a purchase using a credit card?

A

The credit card issuer pays the store

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15
Q

American leaders in the early United States wanted to establish a stable banking system in order to…

A

Promote international trade and economic growth

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16
Q

Which of the following is NOT an example of liquid asset

A

A certificate of deposit

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17
Q

In the 1900s, which characteristic of money did the Russian currency lack?

A

Acceptability

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18
Q

Savings bonds differ from most other bonds in that…

A

The buyer does not receive periodic interest in payments in exchange for a Lowe purchase price

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19
Q

You borrow $500 form your parents to start a bagel delivery service. Your acting as…

A

An entrepreneur

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20
Q

You’re a financial advisor whose client wants a stock that pays regular dividends, you advise home to buy…

A

Income stock

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21
Q

Which of the following is an example of representative money

A

An IOU note

22
Q

Which lender is most likely to charge you the highest interest rate on your loan

A

Finance company

23
Q

The practice of restoring only a portion of deposits on hand is called

A

Fractional reserve banking

24
Q

You do not have to pay state taxes in ingest earned on

A

Treasury bills

25
Q

Investing in a money market mutual fund is a higher risk than investing in a certificate of deposit because unlike CDs, money market funds…

A

Are not insured by the FDIC

26
Q

Against your better judgement, you lend $100 to your cousin Manny, who has a reputation for failing to pay back loans. You are taking a…

A

Credit risk

27
Q

You hear in true news that The Dow has fallen to just below 8000 points. This means that…

A

The Dow is at relatively high levels compared to the early 1980s, but short of its all-time high

28
Q

What are “greenbacks” ?

A

Commodity money used by the Union during the Civil War

29
Q

When you pay for a new CD with a debit card, you authorize the transfer of money from your account to the music store’s account. In other words, a payment by debit card is the electronic form of payment by…

A

Check

30
Q

All of the following are examples of financial intermediaries EXCEPT…

A

A stock certificate

31
Q

A stock split is most likely to occur when…

A

The price of a stock becomes to high

32
Q

How much will the company have paid the holder when it retires its debts

A

$500, plus the original investment of $2,000

33
Q

Which of the following is an example of a barter system

A

Instead of paying rent you clean the house for the owner

34
Q

What is the largest source of income for banks

A

Interest they receive from loans

35
Q

How did the US government make American public have confidence in the nations currency in the 1870s

A

The government adopted the gold standard

36
Q

An example of equity

A

A share of stock

37
Q

How can you offset your risk

A

ask for a higher interest rate

38
Q

What is a mortgage used to purchase

A

Real estate

39
Q

How did Penny and John pay for goods in their transaction

A

Through bartering

40
Q

The main advantage if diversification as an investment policy is that it

A

Reduce risk to investors

41
Q

The most trades are made

A

On the OTC market

42
Q

The Great Crash can be attributed to all of the following EXCEPT…

A

The small number of people buying stock on a margin

43
Q

Which of the following is an example of money as a unit of account

A

Checking the price of a camera at several stores before buying it at the lowest point

44
Q

Which of the following was NOT a cause of the savings and loan crisis of the 1980s

A

The gold reserve act

45
Q

Karen wants to buy stock, but is worried about the current “bear market.” This means that

A

Many investors are selling their stocks in anticipation of lower profits

46
Q

Which of the following is the main disadvantage of using shells as money instead of coins?

A

Uniformity

47
Q

Which of the following is NOT an example of M1 money?

A

A mutual fund

48
Q

How did high rates affect savings and loans (S&Ls) in the 1980s?

A

S&Ls lost money, because they had to pay high interest in current deposits, but received low returns form low-interest loans they had made in the 1970s

49
Q

When you invest Ina mutual fund,

A

Your money is invested in a variety of stocks and bonds

50
Q

Who would a person invest in junk bonds?

A

He does not know anything about investments

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