What is compound interest?

Interest that builds on both the original amount and previous interest

What is a payday loan?

A very short-term loan with high interest

How can someone improve their credit score?

Keep credit balances low and pay on time

What does the CDIC do?

Insures deposits at Canadian banks

What is a difference between dividends and capital gains?

Dividends = regular payments, capital gains = profits from selling a stock

How should a person's age affect their investment risk level?

Younger people can take more risk with their retirement savings

Why are payday loans often considered risky?

They come with very high interest and fees

How do you make money from stocks?

Through capital gains and dividends

What is one advantage of an RRSP over a TFSA? (two possible correct answers)

You can withdraw money from your RRSP to help pay for a house, RRSP contributions are tax deductable

What is the main purpose of a credit score?

To measure how well you manage debt

Which of the following is NOT commonly considered good debt (there are exceptions depending on one's circumstances)

Credit card debt used for luxury items

What is a good way to build your credit history as a young adult?

Open a credit card early and pay it off every month

Which of the following is the most responsible advice regarding payday lenders?

Avoid them whenever possible and explore safer alternatives

A student loan and grant program in Ontario

What is a major benefit of using an RESP?

The government contributes extra money through grants

What is the best reason to use a TFSA?

Your money grows tax-free and you can withdraw anytime

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Financial Literacy Final Test Prep

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Questions 26

Answers

1
Which of the following savings/investment options is best for short-term savings with easy access?
Bank savings account
Locked-in GIC
RESP
RRSP
2
What is the best advice for using a credit card for most people?
Only use it to withdraw cash
Pay the full balance monthly
Only use it on necessities
Pay the minimum balance each month
3
What is compound interest?
Interest paid only on your original deposit
Interest that builds on both the original amount and previous interest
Interest that is taxed by the government
Interest earned from credit cards
4
Roughly, what is a typical annual percentage rate (APR - similar to interest rate) on a payday loan in Canada?
350%
20%
5%
179%
5
What is a payday loan?
A very short-term loan with high interest
A loan you typically repay over 5-10 years
A loan that is interest free for 6 months
A way of collecting OSAP
6
How can someone improve their credit score?
Pay bills late
Keep credit balances low and pay on time
Open as many credit cards as possible
Never use credit
7
What is one advantage of a TFSA over an RRSP?
TFSA contributions are tax-deductible
TFSA withdrawals are not taxed
TFSA accounts are only for retirement
TFSA investments cannot include risky stocks
8
What does the CDIC do?
Provides loans to students
Insures deposits at Canadian banks
Determines mortgage rates
Tracks your credit score
9
Which of the following is considered an asset?
Rent payments
A student loan
A car you own
A credit card
10
What is a difference between dividends and capital gains?
Capital gains are payments from a company, dividends are from resale
There is no difference
Dividends = regular payments, capital gains = profits from selling a stock
Dividends are taxed, capital gains are not
11
How should a person's age affect their investment risk level?
Older people should be a bit more aggressive/risky with their investments
Age doesn't matter to risk level
Younger people should take less risk
Younger people can take more risk with their retirement savings
12
Why are payday loans often considered risky?
They usually improve your credit score
They come with very high interest and fees
They have very low interest rates
They are not backed by the government
13
How do you make money from stocks?
Through capital gains and dividends
By borrowing money
Through bank interest
From guaranteed payouts
14
What is one advantage of an RRSP over a TFSA? (two possible correct answers)
You can withdraw money from your RRSP to help pay for a house
Investments in RRSPs have to pay capital gains tax
RRSP withdrawals are tax deductible
RRSP contributions are tax deductable
15
Which of the following is NOT an example of a payday lender?
Easy Financial
Cash 4 You
Money Mart
TD Bank
16
What is an RRSP used for?
Retirement
Education
Buying a first home
Buying a car
17
When is the best time to start saving to benefit from compound interest?
When interests rates are low
As early as possible
After you've had kids and got married
In the summer
18
What is the main purpose of a credit score?
To show how much money you earn
To track your online purchases
To measure how well you manage debt
To calculate your income tax
19
Which of the following is NOT commonly considered good debt (there are exceptions depending on one's circumstances)
Credit card debt used for luxury items
A student loan to pay for education
A mortgage to buy a home
A reasonable car loan for transportation
20
What is a good way to build your credit history as a young adult?
Take out payday loans to avoid credit card interest charges
Open a credit card early and pay it off every month
Max out your credit card every month to show you can spend effectively
Never use a credit card because it will get you in debt with every purchase
21
What is an RESP used for?
Buying a car
Education
Buying a first home
Retirement
22
Which of the following is the most responsible advice regarding payday lenders?
Use them regularly to build your credit
Choose payday loans over OSAP
Avoid them whenever possible and explore safer alternatives
Rely on them for your monthly bills
23
Which of the following is untrue about OSAP
It is available to everyone
It often includes access to grants (free money)
Access to OSAP is determined by one's parental/caregiver income
It is interest free until you graduate
24
What is OSAP?
A student loan and grant program in Ontario
A federal retirement savings plan
A type of bank account
A payday loan company
25
What is a major benefit of using an RESP?
The government contributes extra money through grants
You can use it to invest in real estate
It can be used for anything, not just education (ex. buying a home)
You don't pay taxes on contributions
26
What is the best reason to use a TFSA?
You pay less tax on your income
It's the only way to save for retirement and avoid tax
You get free money from the government every year
Your money grows tax-free and you can withdraw anytime

Financial Literacy Final Test Prep Flashcards | StudBud