Which of the Following Is an Example of the Precautionary

question 12

Multiple Choice

Which of the following is an example of the precautionary motive for saving?

• A) Pat puts $400 per month in his 401(k) retirement account.
• B) Jordan sets aside $200 per month in case she has to pay for a new roof for her house.
• C) Gerry and Terry put $2,000,000 in a trust fund that will go to their children when they die.
• D) Every month, Chris puts $400 into his saving account so that he can buy a new car in a few years.

---

Definitions:

Futures Price

The agreed price for the assets to be traded in the future as determined in a futures contract.

Profit

The financial gain obtained when the revenue generated from business activities exceeds the expenses, costs, and taxes needed to sustain the activity.

Risk-Free Rate

The theoretical rate of return of an investment with zero risk, typically represented by the yield of long-term government bonds.

Stock Index

A measurement of the performance of a group of stocks, which represents a portion of the overall market.