True/False
Indicate whether the
statement is true or false.
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Ch 16 - Investing for the
Future
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1.
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With inflation, it takes more money to buy the same goods and services.
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2.
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Investments usually allow your net worth to grow at a faster rate than general
price levels.
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3.
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When you invest in stocks and bonds, you are helping businesses make and sell
new products and services.
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4.
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Most financial advisers recommend that you keep three to six weeks’ net
pay in your put-and-take account.
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5.
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Your initial investing should be conservative with low risk.
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6.
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Typically, odds are good that you will make a profit in speculative
investment.
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7.
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The greater risk you are willing to take, the greater the potential
return.
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8.
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Nonmarket risk is entirely predictable and controllable.
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9.
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A common mistake is keeping temporary investments too long and not reevaluating
them regularly to determine how well they are performing.
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10.
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A discount broker usually provides little or no investment advice to a
client.
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11.
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With most types of brokerage accounts, you can manage your account
online.
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12.
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It is illegal to use information in a company’s annual report for
investment purposes.
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13.
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The maturity date of a bond is the date on which the investor must pay the
purchase price of the bond.
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14.
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Mutual funds are the fastest-growing segment of the American financial services
industry.
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15.
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Collectibles are considered one of the safest and most liquid investments
available.
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Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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Ch 16 - Investing for the
Future
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16.
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The use of long-term savings to earn a financial reward is called
a. | investing | c. | speculating | b. | gambling | d. | diversifying |
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17.
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According to the Rule of 72, if an investment of $5,000 is yielding an average
of 6 percent, it will take ___ years for that investment to be worth $10,000.
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18.
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Which of the following is typically the first stage of investing?
a. | speculation | c. | a put-and-take account | b. | systematic
investing | d. | strategic
investing |
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19.
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Maximization of return in the next five to ten years is the goal of which
investment strategy?
a. | strategic investing | c. | speculation | b. | initial investing | d. | systematic
investing |
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20.
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This type of risk is caused by the business cycle.
a. | interest-rate risk | c. | market risk | b. | political risk | d. | industry risk |
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21.
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All of the following are wise investment practices except
a. | seek good investment advice | b. | keep good financial records | c. | define your
financial goals | d. | make your decisions quickly to take advantage of the
market |
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22.
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A daily newspaper that provides detailed coverage of the business and financial
world is
a. | Barron’s | c. | Kiplinger’s Personal Finance. | b. | The Wall Street
Journal | d. | The
Economist |
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23.
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Professional investment planners who are trained to give investment advice based
on your goals, age, lifestyle, and other factors are called
a. | certified financial planners | c. | day traders | b. | certified public
accountants | d. | discount
brokers |
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24.
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Which of the following would be considered the lowest risk
investment?
a. | a stock | c. | an annuity | b. | real estate | d. | a corporate
bond |
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25.
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The right, but not the obligation, to buy or sell a commodity or stock for a
specified price within a specified time period is called a(n)
a. | discount bond | c. | option | b. | annuity | d. | future |
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Numeric Response
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Ch 16 - Investing for the
Future
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26.
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A skateboard costs $72.80 this year. Suppose it cost just $70 last year. What is
the inflation rate on the skateboard?
($72.80-$70)/$70
Solution x 100= Inflation Rate
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27.
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Bob purchased a rare baseball card for $500. Six months later, Terri bought the
card for 7 percent more than Bob paid for it. How much did Terri pay for the card?
(Cost x .07=Percent more) (Percent amount more + Cost=Terri payment
amount)
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Matching
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Chapter 16 - Investing for the Future a. | Speculative | f. | annual report | b. | portfolio | g. | inflation | c. | mutual
fund | h. | interest-rate | d. | Company | i. | Penny | e. | double | j. | diversification |
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28.
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The general rise of prices is called __________.
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29.
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The Rule of 72 is a technique for estimating the num.ber of years required to
__________ your money at a given rate of return
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30.
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A collection of investments is called a(n) __________.
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31.
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__________ investing happens when you make bold and high-risk investment
choices.
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32.
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The spreading of risk among many types of investment is called
__________.
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33.
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__________ risk is associated with owning the stock of just one
organization.
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34.
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The chance that inflation will rise faster than the return on your investments
is called __________ risk.
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35.
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A(n) __________ is a summary of a corporation’s financial results for the
year and its prospects for the future.
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36.
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A(n) __________ is the pooling of money from many investors to buy a large
selection of securities.
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37.
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__________ stocks are low-priced stocks of small companies that have no track
record.
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