WPT Economics and Finance 2

Question 1

What is the stock market?

Accepted Answer

A marketplace where shares of publicly traded companies are bought and sold

Answer

The stock market is a collection of exchanges and markets where investors buy and sell shares of publicly listed companies, with major U.S. exchanges including the NYSE and NASDAQ.

Question 2

What does it mean to 'diversify' an investment portfolio?

Accepted Answer

To spread investments across different asset types and sectors to reduce risk

Answer

Diversification means allocating investments among different asset classes (stocks, bonds, real estate) and sectors so that a loss in one area is offset by gains in another.

Question 3

What is a mortgage?

Accepted Answer

A loan used to purchase real estate, with the property serving as collateral

Answer

A mortgage is a long-term loan secured by real estate, in which the borrower makes regular payments of principal and interest until the debt is repaid or the home is sold.

Question 4

What is the purpose of the Federal Deposit Insurance Corporation (FDIC)?

Accepted Answer

To insure depositors' funds at member banks up to $250,000 per account in case the bank fails

Answer

The FDIC, created in 1933 after widespread bank failures during the Great Depression, insures bank deposits up to $250,000, protecting customers if their bank becomes insolvent.

Question 5

What is the difference between a debit card and a credit card?

Accepted Answer

A debit card draws funds directly from a bank account while a credit card borrows money from a lender to be repaid later

Answer

A debit card immediately deducts money from your checking account, while a credit card charges purchases to a line of credit that must be repaid, often with interest if not paid in full monthly.

WPT - Written Proficiency Test Practice Test

WPT - Written Proficiency Test Practice Test

WPT Economics and Finance 2