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Unit 5: Personal Finance review Flashcards | StudBud
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Unit 5: Personal Finance review
Unit 5: Personal Finance review
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Questions
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Answers
1
Which of the following investments has the
greatest potential
for returns?
corporate bonds
savings accounts
certificates of deposit
stocks
2
Which of the following investments is the
riskiest
?
certificates of deposit
corporate bonds
stocks
savings account
3
What is the term for how easily you can turn your investment back into cash?
coupon rate
maturity
liquidity
par value
4
What is the FDIC?
A gov. agency created to provide jobs
A government agency created to regulate trade
A government agency created to build public works
Gov. agency insures the money people deposit in banks
5
What is the term for the time when a
bond
comes due for repayment?
maturity
capital gain
coupon rate
par value
6
How do banks make money?
through the tools of the Fed
buying stocks of their company
by collecting tax revenue
by charging interest on loans
7
Which of the following is likely to represent an i
nstallment/secured
loan at a
fixed
rate?
An auto loan.
A student loan
A loan from a friend
A credit card
8
Why is
diversification
of financial investments beneficial?
if one investment fails your other investments are safe
provides a higher return on investment
allows you to invest all your $ in one stock
if one investments succeeds you must sell all the rest
9
Which of the following is an example of "wise" or good debt?
home loan
credit card balances
borrowing $ to buy stocks
borrowing $ to see a concert
10
What is the name of the
loan
one gets to purchase a house?
default
mortgage
capital gains
dividend
11
Unsecured
loans have lower interest rates.
True
False
12
Which of the following investments is the
least
liquid?
mutual funds
stocks
savings account
bonds
13
What is the term for the
fee
we pay for using money now that we don't have (borrowing)?
maturity
capital gains
interest
dividends
14
What is the purpose of a
Schumer box
when applying for a credit card?
It summarizes how much interest you have accrued in the last 90 days
It gives a detailed explanation of your credit history
It summarizes information like interest rates, fees, and grace periods
It tracks your spending habits to help you find ways to budget your money
15
If you select a a repayment plan with a
longer term
for your loans...
You will have a larger monthly payment
You will pay less in interest
You will pay the same amount in interest
You will have a smaller monthly payment
16
Wealth
is
Liabilites X Assets = Net Worth
Liabilities -Assets = Net Worth
Assets + Liabilities = Net Worth
Assets - Liabilities = Net Worth
17
Which investment tool is offered by an employer?
a 401(k)
a Mutual Fund
a Roth IRA
an Index Fund
18
A
credit card
is _______________________.
Free money!
All of the above
the exact same things as a debit card
A line of credit/revolving loan
19
What do the Dow and S&P do?
arrange the buying and selling of bonds
track the performance of a representative # of companies
arrange the buying and selling of stocks
track the performance of the Jonas Brothers
20
If you have a
low credit score
which of the following would most likely be true?
You will live in the lap of luxury
You will have to pay lower interest rates
You will have an easier time getting a loan
You will have to pay higher interest rates
21
What is
Compound Interest
?
Saving money for a big purchase
Interest paid on interest previously earned.
Money you owe the bank
The rise in the price of goods and services over time
22
What is typically the
50%
in the 50/20/30 budget?
wants/entertainment
What's a budget?
needs/necessities
savings/financial goals
23
Which of the following is true for someone with an
850
credit score?
They maxed out their credit cards
They have a high interest rate on their loans
They pay their bills on time
They have a diversified portfolio
24
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
25
What is the term if you sell your investment for
less
money than you originally paid for it?
credit risk
capital loss
inflation risk
capital gain
26
It is possible to look rich and not have any wealth.
All of the above
I don't get the question
Unfortunately YES, if you have massive debts.
NO, That's ridiculous
27
What is the main appeal of an
index fund
?
They give you partial ownership of a single company
They are typically low cost and diversified investments
They are always actively managed to add a human touch
They are always managed by a robo-advisor to remove human bias
28
In the United States, which type of
currency
do we have?
Funny money
Representitive money
Commodity money
Fiat money
29
In the 50/20/30 Rule,
30%
of your budget is supposed to go towards your saving/investing.
What's a budget?
True
False
30
Which stock market index tracks the
30
largest companies in the U.S.?
the S & P
Nikkei
NASDAQ
the Dow Jones
31
Which of the following investments is the
most
liquid?
savings account
certificates of deposit
corporate bonds
stocks
32
What does it mean to
default
on a loan?
You pay your loan a few days late.
You stop paying on your loan.
You borrow money from your parents.
You pay your loan off early.
33
Which of the following is an example of a
wealth creating
asset?
car
house
computer
credit cards
34
The unique thing about
Roth IRAs
, is that
you don't pay taxes when you make withdrawals
all the money you invest is before paying taxes on it
your employer opens the account for you
all of the above
35
What is the term for all of a person's belongings that he/she may
sell
for money?
liabilities
capital gains
stocks
assets
36
Why is it important to start investing
as soon as possible
?
You take less risk when you are young, so money will be safe
Investing is an easy way to make quick money
Fees on investments are cheaper when you are younger
You have more time for your money to compound
37
Which investment tool gives you a
high return
,
high liquidity
and
low risk
?
none of 'em
savings acct
bonds
both of them
38
What is a
bond
?
partial ownership in a company
a loan
type of savings account
profit shares
39
Interest rates
on credit cards...
Are the same regardless of which company issues the card
Are the same for everyone
Vary depending on credit scores and payment history
Vary based on age and income
40
Why would a person diversify their portfolio?
to maximize their profits
to get the most dividends as possible
to reduce their risk of losing everything
to eliminate their risk of losing everything
41
Which of the following statements is TRUE about
savings accounts
?
They are easy to access your cash
They typically offer very low interest rates
All of the above
They are safe (insured by the government)
42
What is the term for investing in a
variety
of different companies and types of investments?
profit sharing
portfolios
diversification
liquidity
43
Which of the following is true concerning the stock market?
Only invest if you have a lot of money to lose
Buy low and sell high
It is too risky and should be avoided
Buy high and sell low
44
What is the term for putting money aside today to make more in the future?
savings account
deposits
capitalizing
investing
45
Why is financial literacy important?
to know the basics of personal fiance and money management
All of the above
to understand how to build wealth
to better understand credit scores, risk, interest rates
