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2020 Personal Finance review Flashcards | StudBud
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2020 Personal Finance review
2020 Personal Finance review
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Questions
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Answers
1
What is the term for investing in a variety of different companies and types of investments?
liquidity
portfolios
profit sharing
diversification
2
What is the FDIC?
A gov. agency created to provide jobs
Gov. agency insures the money people deposit in banks
A government agency created to regulate trade
A government agency created to build public works
3
Having a fractional reserve banking system means that:
a central bank must approve loans over $100,000
No single loan can be larger than 20% of the bank's holdings
a bank cannot lend out all of its deposits
the central bank holds a certain fraction of GDP on reserve
4
Which of the following is true considering the stock market?
Buy low and sell high
Buy high and sell low
Only invest if you have a lot of money
It is too risky and should be avoided
5
Why is financial literacy important?
to know the basics of personal fiance and money management
All of the above
to better understand credit scores, risk, interest rates
to understand how to build wealth
6
Fractional reserve banking refers to banks
keeping a fraction of your money and loaning out the rest.
being only fractionally reliable in keeping your money safe.
loaning only small fractions of money to most clients.
only giving you a fraction of your money back
7
What do the Dow and S&P do?
track the performance of a representative # of companies
track the performance of the Jonas Brothers
arrange the buying and selling of bonds
arrange the buying and selling of stocks
8
What does it mean to default on a loan?
You pay your loan off early.
You pay your loan a few days late.
You borrow money from your parents.
You stop paying on your loan.
9
Which of the following statements is TRUE about payday loans?
They are harder to pay back b/c of high fees & rates
They are harder to pay back b/c of low fees & high rates
They are easier to pay back b/c of lower fees & higher rates
They are easier to pay back b/c of lower fees & lower rates
10
Which of the following is an example of "wise" or good debt?
student loan
borrowing $ to see a concert
borrowing $ to buy stocks
credit card balances
11
The 50/20/30 Rule is the preferred/recommended way to think about a monthly budget.
What's a budget?
True
False
12
What is the main difference between a credit card and debit card?
Only one is accepted by most businesses
One charges high interest the other charges low interest rates
Only one can be used as cash
Only one has to be in your checking account
13
What is the name of the loan one gets to purchase a house?
capital gains
mortgage
default
dividend
14
Payday loans have very high interest.
False
True
15
What is the term for the fee we pay for using money now that we don't have?
capital gains
maturity
interest
dividends
16
Which of the following is an example of a wealth creating asset?
car
computer
house
credit cards
17
When the stock market falls over a period of time, it is known as...
a boom
a bull market
a depression
a bear market
18
What is the term for the time when a bond comes due for repayment?
coupon rate
par value
maturity
capital gain
19
Which of the following investments has the greatest potential for returns?
certificates of deposit
corporate bonds
savings accounts
stocks
20
Which stock market index tracks the 30 largest companies in the U.S.?
NASDAQ
Nikkei
the Dow
the S & P
21
If you have shares of stock and your company makes money, what do you receive as an owner?
interest
dividends
capital gains
maturity
22
What is the term for how easily you can turn your investment back into cash?
par value
liquidity
maturity
coupon rate
23
What is a bond?
partial ownership in a company
profit shares
a loan
type of savings account
24
Which of the following investments is the most liquid?
savings account
corporate bonds
stocks
certificates of deposit
25
Which of the following investments is the riskiest?
stocks
savings account
corporate bonds
certificates of deposit
26
Why would a person diversify their portfolio?
to reduce their risk of losing everything
to get the most dividends as possible
to eliminate their risk of losing everything
to maximize their profits
27
What is the term for putting money aside today to make more in the future?
capitalizing
savings account
deposits
investing
28
If you have a low credit score which of the following would most likely be true?
You will have an easier time getting a loan
You will have to pay lower interest rates
You will have to pay higher interest rates
You will live in the lap of luxury
29
If you own shares of stock, what are the 2 ways you could potentially make $?
dividends + capital gains
dividends + profits
capital gains + mutual funds
mutual funds + dividends
30
What is the term for all of a person's belongings that he/she may sell for money?
stocks
liabilities
capital gains
assets
31
Why is diversification of financial investments beneficial?
if one investments succeeds you must sell all the rest
if one investment fails your other investments are safe
provides a higher return on investment
allows you to invest all your $ in one stock
32
Wealth is
Liabilities -Assets = Net Worth
Assets - Liabilities = Net Worth
Liabilites X Assets = Net Worth
Assets + Liabilities = Net Worth
33
Which of the following investments is the least liquid?
corporate bonds
mutual funds
savings account
stocks
34
Which of the following is true for someone with an 850 credit score?
They maxed out their credit cards
They pay their bills on time
They have a high interest rate on their loans
They have a diversified portfolio
35
Which investment tool gives you a high return, high liquidity and low risk?
savings acct
bonds
none of 'em
both of them
36
What is the term if you sell your investment for less money than you originally paid for it?
credit risk
inflation risk
capital loss
capital gain
37
Which of the following is likely to represent a fixed rate, secured debt?
A loan from a friend
A student loan
A dealer-financed auto loan.
A credit card
38
A credit card represents _______________________.
Free money
A line of credit
All of the above
Is the same things as a debit card
39
What is Compound Interest?
Money you owe the bank
The rise in the price of goods and services over time
Interest paid on interest previously earned.
Saving money for a big purchase
40
What is typically the 50% in the 50/20/30 budget?
What's a budget?
savings/financial goals
needs/necessities
wants/entertainment
