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Module 10 Test - Savings Flashcards | StudBud
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Module 10 Test - Savings
Module 10 Test - Savings
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1
The Federal Reserve is:
The bank that handles checking accounts only
The central bank of the United States that governs monetary policies
The Bank that sets operating hours for all banks in the United States
The bank that governs banks in New York only
2
Joy is taking out a car loan, and must pay it back with interest. Which option will require the lowest interest payment?
Annual Compounding
Semi-annual Compounding
Daily Compounding
Monthly Compounding
3
The purpose of a budget is to:
Tell you how much you owe the government in taxes
Stop you from spending too much money
Increase the balance of your savings account
Help you plan how you will spend the money you earn or receive
4
Which of the following is the most important consideration when planning your budget?
A budget is only good for people who are married
Create a budget only after you buy your first home
A budget should never be re-evaluated as your income & expenses change
Budget for your needs before your wants
5
Some investments have potential for high earnings but you cannot get the money right away if needed. What is this risk?
interest rate risk
income risk
liquidity risk
insurance risk
6
What happens if you have a tax deferred retirement plan?
You pay taxes on the money every year until you retire
You do not pay taxes until you withdraw the money at retirement
You pay taxes on the plan every year
You pay taxes on the money until it is withdrawn
7
John has a savings account and wants to maximize the interest earned. What action would allow him to earn MORE interest?
Leave his money alone and hope it grows on its own
Wait until interest rates go up to 10%
Transfer money into his checking account each month
Get an account with high interest rate and leave it there for a long time
8
Your friend is overspending and in need of a budget. Which expense would you tell him/her to reduce next month?
Going to the movies
Buying food
Purchasing asthma medication
Transportation costs to get to school and back
9
How much money should a person save in order to be financially secure?
enough money to pay for short term goals
$500
6 months of expenses
10% of your expenses
10
Tamara has $500 and is saving for a trip. She will not need the money for a year. Which savings account will be best?
Money Market Account
Certificate of Deposit
Checing Account
Savings Account
11
What is net worth?
total value of what a person owns
total value of what a person owns minus what a person owes
total value of a person's money inthe bank minus what he/she owes
total value of a person's money in the bank and certificates of deposit
12
To earn as much interest as possible, choose a savings account that earns ____ interest and has the ____ rate.
Compound; Highest
Simple; Lowest
Simple; Highest
Compound; Lowest
13
Sam is currently saving $50 from every paycheck. What step from the 5 Stages of Investing has he reached?
Stage 3: Systematic Investing
Stage 2: Beginning to Invest
Stage 4: Strategic Investing
Stage 1: Put and Take Account
14
Sally worked for ABC with a 401K, then changed jobs to XYZ with a new 401K. How can she maximize her retirement payout?
Open a new account at XYZ that does not include her investments at ABC
Place her money in an IRA
Rollover her money from ABC
Spend the money she saved without being taxed
15
When it comes to saving money, what is a good rule of thumb?
Put aside money for savings each month
Save money for specific wants
Save money when you finish college
Save only when you think you have the money at the time
16
The Rule of 72 can be used to determine __________________.
how many years you should save for retirement
how soon you should start investing and saving
the years it will take for your investment to double based on interest rate
how many years it will take to pay off your credit card balance
17
Jorge has $300. He wants to buy a bike next week. Which type of account would be Jorge's best choice?
Money saved under a mattress
Certificate of Deposit
Checking Account
Savings Account
18
You can determine how much interest you will earn by multiplying the amount in your savings account (principal) by the:
annual interest rate
number of months it is in the account
time period and annual interest rate
time period
19
Which of the following will give you the LEAST access to your money?
Checking Account
Certificate of Deposit (CD)
Savings Account
Money under the mattress
20
Which of the following is considered a "Need"?
Food
Watching TV
Buying a new car
Playing Sports
21
APR is:
Annuities Payment Rate: payments received from investments
Annual Percentage Rate: interest charged on a loan or credit card balance
Annual Payment Rate: payments made to credit card companies
Average Pay Rate: average pay increase for loan amounts
22
What is the typical relationship between the period of time and the interest rate?
Longer time periods usually have no effect on interest
Shorter time periods usually have no effect on interest
Shorter time periods usually equals higher interest earned
Longer time periods usually equals higher interest earned
23
When comparing and contrasting saving and investments, what is
true
?
Savings is less liquid than investments
Savings should be used to pay fro medium to long term goals
Savings should be built first, then investments for long term goals
Savings allows for higher returns to be obtained
24
Employer offered retirement account; contributions are taken out of your paycheck befor you pay any taxes on income.
IRA
401K
Pension Plan
Annuity
25
Which of the follow is an advantage of a traditional IRA?
You control the management of funds
You are taxed in the current year of your contribution
You can withdraw all of the money in the account without paying taxes
You can use the funds at any time without penalites
26
Interest paid on the original principal and all previously earned interest is ___________.
comprehensive interest
simple interest
compound intetest
investment interest
27
You are opening a savings account that earns compound interest. Which frequency will earn you the MOST money?
Compounding Monthly
Compounding Daily
Compounding 4 times a year
Compounding 1 time a year
28
Which type of account has very high liquidity, low or no interest, and a low minimum balance?
5-Year Loan
Checking Account
Certificate of Deposit (CD)
Savings Account
29
To buy a TV, you take out a loan for $3,000, at 3% interest rate for 7 years. How much interest will you end up paying?
$3,200
$2,700
$27
$270
30
What stage of investing involves buying penny stocks, junk bonds, or investing in other high risk stocks?
Stage 5: Speculative Investing
Stage 2: Beginning to Invest
Stage 3: Systematic Investing
Stage 4: Strategic Investing
31
Retirement account that allows people to make tax-deductible contribuitions, managed by the individual (not by employer)
pension plan
401K
IRA
mutual fund
32
FDIC stands for:
Finance Direct Impact Company
Finance Deposit In Charges
Federal Deposit in Cash
Federal Deposit Insurance Corporation
33
You invested $15,000 into a CD earning 15% interest. How long will it take your investment to double?
48 years
22.5 years
4 years
4.8 years
34
Jeffrey must pick a savings account type. Which should he choose if he wants the best rate of return on his interest?
Semi-Monthly Compounding
Daily Compounding
Annual Compouding
Monthly Compounding
35
Bank A CD: 7% for 5 years; Bank B CD: 5% for 5 years; Bank C CD: 6% for 5 years. Which earns more interest on your $?
Bank A or Bank C
Bank A
Bank C
Bank B
36
John wants to maximize the amount of interest he earns. Which action will enable him to earn MORE interest?
An account with a high interest rate & leaving the money there for a while
Waiting until interest rates go up to 10%
Leaving his money alone and hope it grows on its own
Transferring money into his checking account each month
37
An account that pays a guaranteed interest rate on a sum of money that a person has deposited.
certificate of deposit
IRA
401K
annuity
38
Which of the following would be considered a "Want"?
Shelter
Water
Designer Sneakers
Air
39
What types of goals are you setting if you set aside money for your child's education immediately after they are born?
long term goal
intangible goal
medium term goal
short term goal
40
Interest on a loan is:
A charge for the convenience of accessing money in your account
The cost of borrowing - the amount of money owed for borrowing money
A charge for lending money to a bank
The amount added into your savings when opening a bank account
