Investments in stocks have the potential for very high returns. This also means that stocks have which other characteristic?

1. Guaranteed payments

2. High risk of losses

3. Pay low interest rates

4. Very difficult to purchase

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Red Financial is a financial institution owned by a group of shareholders. They are insured by the FDIC and offer a large range of financial services and personal financial planning. Red financial also

makes large profits, which the stockholders like. Based on this information, what type of financial institution is Red Financial?

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1. Bank

2. Savings and loans

3. Credit union

4. Online transfer facility

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When dealing with investments, as risk of losing money increases

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25% 25%25%25%1. The rate of return is

usually higher

2. It is more likely the investment is short term

3. More insurance is needed to protect the investment

4. More people take that risk

Banks pay depositors interest to put money in the bank. When someone takes a loan from a bank they must pay

interest back to the bank. Which statement about these two interest rates is correct?

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1. The rate banks pay is equal to the rate they charge.

2. The rate banks pay is regulated by the government and the rate they charge is not.

3. The rate banks charge is higher than the banks pay.

4. The rate banks charge is lower than the rate banks pay.

Which component of the Federal Reserve system holds the most power in regards to

monetary policy?

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25% 25%25%25%1. Congress and the

President

2. The Federal Open Market Committee

3. The Board of Governors

4. The 12 District banks

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When dealing with insurance, a person paying a higher deductible will typically have

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1. Lower premiums

2. Higher inflation

3. Smaller returns

4. Greater risk

When the income in households increases, what is the likely result?

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1. The supply curve becomes vertical

2. The demand curve shifts to the left

3. The supply curve will shift to the left

4. The demand curve shifts to the right

What is the typical relationship between education and income?

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1. Higher education levels yield lower incomes over time

2. Higher education levels yield higher incomes over time

3. Higher income levels lead to higher education levels

4. The relationship between education and income is uncertain

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Which financial institution is MOST LIKELY to require membership and offer low loan

rates to its members?

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1. Bank

2. Savings and loan

3. Credit union

4. Retail store

Which is a primary benefit of all types of insurance?

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1. Lawsuits are easier to settle

2. Insurance keeps prices low in a market

3. People can be more careless

4. It helps people share risk

Blue Financial is a financial institution owned by its members. It offers lower loan rates and easier application

processes for its members. Based SOLELY on this information, Blue Financial is MOST LIKELY a

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1. Credit union

2. Bank

3. Savings and loan

4. Credit card agency

Smithville Community Bank pays depositors 2.5% interest for money put into savings accounts. When they make

loans the bank charges 4% interest. Why is there a difference in these two rates?

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25% 25%25%25%1. The bank is not as concerned with attracting depositors as it is with making loans.

2. It is a source of profit for the banks to have a higher interest charged than interest earned.

3. The 2.5% rate is the minimum a bank is allowed to pay for deposits.

4. People taking out loans demand higher interest rates than those making deposits.

Shondelle has a large sum of money to invest. She is not concerned with large return, but is very sensitive to risk.

Which would be the best investment for her?

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1. A savings account

2. Checking account

3. Stock market

4. Real estate

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Bill is choosing between two different savings accounts. One has simple interest and the other has compound interest. If Bill is

planning on saving money for a long period of time and he wants the most return on his savings he should choose the account

with

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25% 25%25%25%1. Compound interest because it will

pay an increasing amount of interest based on the amount of the original deposit

2. Simple interest because that account will pay interest on the total amount in the account at all times

3. Simple interest because it is easier to calculate

4. Compound interest because it will pay interest on the original deposit plus interest earned over time

Which factor will have the LEAST impact on whether a person gets credit or not?

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1. Collateral, how much the person’s assets are worth

2. Character, how willing the person is to pay back the loan

3. Capacity, how able the person is to pay back the loan

4. Compatibility, how much the loan officer likes the person

Which shows the correct order of investments going from MOST risky to

LEAST risky?

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1. Savings accounts, mutual funds, stocks, bonds

2. Stocks, mutual funds, bonds, savings accounts

3. Stocks, savings accounts, mutual funds, bonds

4. Savings accounts, bonds, mutual funds, stocks

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Bailey makes $20,000 a year and pays 5% in taxes. Felicia makes $85,000 a year and pays

2.6% in taxes. This type of tax system is

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1. Regressive

2. Proportional

3. Sales

4. Progressive

Which type of insurance does a person need if they wish to continue to receive a paycheck when

they are out of work due to an injury?

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1. Property

2. Life

3. Health

4. Disability

Mr. Jones has a large sum of money he wishes to invest. He wants the largest return possible and is not very

concerned with high risk. Based solely on this information, the best type of investment of Mr. Jones would be

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1. Stock

2. Mutual funds

3. A savings account

4. Treasury bonds

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