YIW High School Pre/Post Tests
20 Questions
1. Which strategy is most likely to improve most people’s financial situation over a lifetime?
a. using credit to spend more than a person earns
b. making financial decisions quickly
c. saving early in life when a person begins earning an income
d. gaining work experience early instead of continuing in school
2. What is the opportunity cost of letting your interest compound in your savings account instead of withdrawing the interest as it is earned?
a. lower taxes in the current year
b. increased risk of losing savings
c. less money for current purchases
d. more interest on the savings account
3. Charlie opens a savings account and deposits $500. If the savings account has a fixed annual interest rate of 5 percent, and he makes no additional deposits or withdrawals, what amount will Charlie have in his savings account at the end of two years?
a. exactly $505
b. exactly $550
c. less than $550
d. more than $550
4. Beginning to save while you are young is recommended by financial experts because it:
a. is easier to save when you first begin earning income.
b. is hard to save later in life when you have more income to spend.
c. allows you to lock in higher interest rates when you buy on credit.
d. lets compound interest work in our favor by earning interest on interest.
5. About how many years would it take for $1,000 to become $2,000 if $1,000 is deposited in a savings account with an interest rate of 7.2 percent?
a. 7.2
b. 10.0
c. 14.4
d. 20.0
6. When making an investment, “market price risk” refers to which possibility?
a. the difficulty of converting one’s investment into cash
b. the value of the investment could decrease over time
c. the inability to get any money back from the investment
d. the interest earned might be greater than the rate of inflation
7. Liquidity risk is highest for which type of investment?
a. real estate
b. mutual fund
c. savings account
d. individual stocks
8. What is the general relationship between risk and reward?
a. the higher the risk, the lower the potential reward
b. the higher the risk, the higher the potential reward
c. the amount of risk does not influence potential reward
d. there is a relationship, but it is uncertain
9. How do you calculate the real rate of return on an investment?
a. subtract the rate of inflation from the nominal rate of return
b. subtract the nominal rate of return from the rate of inflation
c. subtract the nominal rate of return from the annual rate of return
d. subtract the annual rate of return from the nominal rate of return
10. Common stock provides the shareholder with:
a. ownership in a company
b. a set interest rate per year
c. guaranteed annual dividends
d. insured protection on investment
11. What are the three most important criteria to consider when investing?
a. size, insurance, taxes
b. leverage, margins, credit
c. risk, rate of return, liquidity
d. collateral, access to accounts, dividends
12. A company calls you and offers an investment opportunity with very high returns. All you have to do is recruit some of your friends who will also invest and soon your checks will start rolling in. This is a description of which type of investment fraud?
a. identity theft
b. a loan scam
c. credit repair scam
d. a pyramid scheme
13. Which of the following is NOT a major source of financial capital?
a. retained earnings
b. debt
c. equity financial instruments
d. dividends
14. How much of a corporation’s net profit to be paid to shareholders is determined by:
a. government regulation
b. board of directors
c. stockholders
d. Securities and Exchange Commission
15. The portion of net profit paid to shareholders is called:
a. investment
b. dividends
c. liabilities
d. assets
16. The New York, American, and OTC stock exchanges deal primarily with securities for sale as:
a. primary distributions
b. secondary trades
c. commodities trades
d. foreign exchange transaction
17. The two types of equity instruments are:
a. common and preferred stocks
b. new and past holdings
c. assets and liabilities
d. cost and profit
18. Investment banker’s primary function is to:
a. act on behalf of the Securities and Exchange Commission
b. invest the public’s money in securities
c. act as an intermediary between corporations needing funds and the general public buying securities
d. pay interest on loans made through stocks and bonds
19. Which of the following carries a fixed dividend rate?
a. common stock
b. bonds
c. preferred stock
d. commodities
20. Corporations prefer to finance growth through:
a. retained earnings
b. debt
c. issuance of stocks and bonds
d. long-term planning
The Young Investor Webpage is funded in part by a grant from the Investor Protection Trust, www.investorprotection.org