1 A) to allow business expansion, which increases income for consumers B) to raise the standard of living in the United States C) to provide funds for savings institutions to lend D) to make future purchases, for emergencies, and for retirement 2 A) The only difference between a passbook savings account and a statement savings account is the manner in which transactions are recorded. B) The trade-off for having the easy availability of funds offered by the passbook and statement accounts is the high minimum-balance requirement. C) Because it offers a high rate of interest, a money market deposit account does not offer checking. D) Passbook and statement savings accounts generally offer higher interest than money market accounts. 3 A) time deposit accounts limit the number of checks that may be written against the account each month. B) savers who decide to cash a time deposit before maturity pay a penalty. C) a CD with a maturity of 2 years would have a higher interest than one with a maturity of 1 year. D) the longer it is to the maturity date, the higher the interest. 4 A) unlike bonds, stocks do not have a maturity date. B) corporations are not required to issue stock; all corporations issue bonds. C) stocks do not have a fixed dividend rate; bonds pay a fixed rate of interest. D) stocks represent ownership and bonds represent debt. 5 A) Money market funds use investor's money to buy stock in financial institutions. B) A managed mutual fund is one in which the managers adjust the mix of stocks and move with the market in an attempt to generate the highest yield. C) A mutual fund is an investment company that pools money of many individuals to buy stock, bonds, or other investments. D) The 500 stocks tracked by Standard and Poor's may be used as the basis for an index fund. 6 A) In the Roth IRA, individuals are allowed to invest $2,000 a year, but that amount is not tax deductible. Instead, the interest earned on the contributions to the Roth IRA is tax-free when they are withdrawn during retirement. B) Individuals who earn less than $30,000 a year can invest up to $2,000 a year in a conventional IRA and deduct it from taxable income. C) Many individuals who are not self-employed have company retirement plans called pension plans that provide retirement income. D) The Keogh Plan allows corporate employees to save up to 15% of their income each year, up to a certain amount, and deduct that amount from their yearly taxable income. 7 A) Will my standard of living at retirement depend largely on my accumulated savings? B) How important is it to have cash readily available? C) What degree of risk am I willing to take? D) How are my friends saving?
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