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ch6

True/False
Indicate whether the sentence or statement is true or false.
 

1. 

Buying stocks makes an investor a part owner of a corporation.
 

2. 

Corporations are required to issue bonds.
 

3. 

Treasury bills are attractive to people with limited money to invest.
 

4. 

The stock market is regulated at the state and federal level.
 

5. 

If a savings bond is redeemed before it matures, the interest becomes taxable.
 

6. 

Social Security will provide enough income for retired people to live comfortably.
 

7. 

A major benefit of pension plans is tax savings.
 

8. 

A Keogh Plan is a retirement plan for self-employed people.
 

9. 

Investments with a lower risk have a lower return.
 

10. 

A person who cannot afford investment losses should diversify into stocks and bonds.
 

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

11. 

The saving of money by an individual
a.
benefits the whole economy.
c.
lowers the standard of living.
b.
deprives others of money to invest.
d.
benefits the saver only.
 

12. 

With which kind of account does a depositor receive a booklet in which to record deposits, withdrawals, and interest?
a.
statement savings account
c.
certificate of deposit
b.
money market deposit account
d.
passbook savings account
 

13. 

A money market deposit account
a.
pays relatively high interest rates.
c.
requires no minimum balance.
b.
pays low interest rates.
d.
allows unlimited withdrawals.
 

14. 

Interest rates on certificates of deposit depend on
a.
minimum balance.
c.
number of withdrawals.
b.
length of maturity.
d.
federal insurance.
 

15. 

Most savings institutions in the United States
a.
are not insured by federal agencies.
c.
insure deposits up to $100,000.
b.
insure deposits over $1 million.
d.
charge a fee for insurance.
 

16. 

The money return a stockholder receives on the amount invested in a company is a
a.
capital loss.
c.
bond.
b.
dividend.
d.
risk.
 

17. 

All corporations are required to
a.
pay dividends.
c.
issue stock.
b.
pay a fixed rate of interest.
d.
make a profit.
 

18. 

Which of the following is purchased at half the face value?
a.
tax-exempt bond
c.
Treasury note
b.
mutual fund
d.
savings bond
 

19. 

Which of the following investments has the greatest risk?
a.
stock market
c.
Treasury bill
b.
savings bonds
d.
mutual fund
 

20. 

What do Treasury bills, Treasury notes, and Treasury bonds have in common?
a.
all mature in the same amount of time
b.
all pay the same interest rate
c.
all are exempt from federal income tax
d.
all are issued by the federal government
 

21. 

A major benefit of a private or personal pension plan is
a.
penalty-free withdrawal of funds.
c.
higher tax rate.
b.
deferred federal income tax.
d.
no federal income tax.
 

22. 

The trade-off for investing in real estate is
a.
never getting your money back.
b.
not being able to get your money back quickly.
c.
being able to sell the property on short notice.
d.
making a large profit.
 

23. 

Investing savings in several different types of accounts
a.
lowers the overall risk.
c.
is a risk-free investment.
b.
increases the risk.
d.
is only for self-employed people.
 

24. 

The interest earned on contributions to a Roth IRA
a.
is tax-free forever.
c.
is taxed yearly.
b.
is taxed when you withdraw funds.
d.
is taxed at a high rate.
 

25. 

The most risk-free investment is
a.
real estate.
c.
an insured passbook savings account.
b.
mutual funds.
d.
stock.
 

Completion
Complete each sentence or statement.
 

26. 

A person receives ____________________ on savings for as long as money is in the account.
 

 

27. 

A depositor with a _________________________ records transactions in a booklet.
 

 

28. 

____________________ is the time at which deposits will pay a stated rate of interest.
 

 

29. 

The trade-off for a _________________________ is a minimum balance requirement.
 

 

30. 

A ____________________ with a short-term maturity pays less interest than one with a long-term maturity.
 

 

Matching
 
 
Match each item to the correct statement below.
a.
saving
b.
interest
c.
time deposits
d.
maturity
e.
certificates of deposit
 

31. 

savings plans that require savers to leave their money on deposit for certain periods of time
 

32. 

time deposits that state the amount of the deposit, maturity, and rate of interest being paid
 

33. 

payment people receive when they lend money or allow someone else to use their money
 

34. 

setting aside income for a period of time so that it can be used later
 

35. 

time at which deposits will pay a stated rate of interest
 
 
Match each item with the correct statement below.
a.
stockholders
b.
capital gain
c.
savings bonds
d.
brokers
e.
mutual fund
 

36. 

company that pools the money of many individuals to buy investments
 

37. 

people who have invested in a corporation and own stock
 

38. 

people who act as go-betweens for buyers and sellers of stocks and bonds
 

39. 

bonds issued by the federal government as a way of borrowing money
 

40. 

increase in value of an asset
 
 
Match each item with the correct statement below.
a.
pension plan
b.
Keogh Plan
c.
IRA
d.
Roth IRA
e.
diversification
 

41. 

private retirement plan that allows people to save a certain amount of untaxed income with tax-deferred interest
 

42. 

private retirement plan that taxes income before it is saved
 

43. 

company plan that provides for retirement income
 

44. 

spreading of investments to lower overall risk
 

45. 

retirement plan for self-employed individuals
 



 
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