Hi

Barbara has worked for several years as the manager of a retail shoe store. She has saved $10,000. She would like to invest most of her savings in a way that will earn a better return than the 4.5 percent her bank has been paying her on one-year CDs. She does not feel she should take much of a risk with her savings because she wants to use them to make a down payment when she buys a home in a few years. How do you think Barbara should invest her savings?

Barbara does not have enough money to invest to diversify her investments very much. She should consider putting her money into a no-load mutual fund that charges a low maintenance fee each year. She should not invest all of her savings in stock because there is no guarantee that the funds she buys will go up in value. She should keep at least several thousand dollars in an insured bank account.

Paying debts with cash eliminates the risk of theft taking place.

False

Shares of preferred stock provide owners a fixed return and a vote in important corporate decisions.

False

Ryan and Melissa are married. They both work and contribute equally to their household income. They can afford to spend no more than $3,000 per year for insurance. Fortunately, Melissa's employer provides medical insurance for both of them if she pays $800 of the cost. They pay another $800 for automobile insurance. Which of the policies listed below should they buy with their remaining $1 ,400? --$50,000 in term life insurance for $300 per person --Renter's insurance for their apartment for $400 --$50,000 in whole life insurance for $700 per person --Special insurance to protect Melissa's inherited jewelry for $350.

Ryan and Melissa should both buy term life insurance because they both contribute to household income. Renter's insurance also is important to protect their property and provide liability protection. Insuring Melissa's jewelry probably is a good idea also. There is little reason for them to buy whole life insurance because it is very expensive.

A mutual fund is a financial organization that accepts funds from many people and invests them in a variety of stocks or bonds.

True

What is compound interest?

interest paid on an amount deposited and on interest that has already been earned

When is the price of a type of stock sure to increase?

when demand for the stock exceeds its supply

How should a person with limited funds invest in stock?

through a mutual fund

What should consumers try to accomplish when they buy insurance?

to limit risks to those they could deal with on their own

Which of these is not a type of insurance that all consumers should purchase?

travel insurance

Which of the following is an example of property insurance?

a policy that pays for damage to your home caused by fire

How may stockholders earn a return from their stock?

dividends and capital gains

Any amount of money you deposit in a bank is insured by an agency of the federal government.

False

Financial planners earn income by charging a fee equal to 3 percent of the assets they manage.

False

Insurance you buy for your car is an example of personal insurance

False

All banks are required to calculate the interest they pay in exactly the same and report it as the average percentage yield (APY).

True

Interest rates on money market accounts are slightly higher than on savings accounts but they can vary from day to day.

True

To set premiums, insurance companies need to know the probability of a loss being suffered and the expected cost of the losses.

True

What would be sure to cause the price of a corporate bond to increase on the secondary market?

a decrease in prevailing interest rates

Which of the following is not a fee banks often charge their checking account customers?

a fee for writing too many checks in a month

Economists define saving as the act of choosing not to spend current income.

True

Which of the following is not an advantage of storing savings in a bank'?

Banks pay high interest rates on all deposits.