What is the benefit of a target date fund (TDF)?

TDFs adjust assets allocation automatically based on retirement year

How is compound interest different from simple interest?

It is simple interest + interest earned on that interest

Why is it important to start investing as soon as possible?

You have more time for your money to compound

How does the 50/30/20 rule of thumb for budgeting allocate your income?

50% Needs, 30% Wants, 20% Goals

How does inflation impact the money in your savings account?

The purchasing power of your money decreases over time

What is the main appeal of an index fund?

They are typically low cost and diversified investments

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Investing and Financial Literacy

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Questions 20

Answers

1
What is the benefit of a target date fund (TDF)?
TDFs come with lower fees
TDFs guarantee a certain rate of return by the target date
TDFs are insured against loss for the first 5 years
TDFs adjust assets allocation automatically based on retirement year
2
How is compound interest different from simple interest?
It is simple interest + interest earned on that interest
It is simple interest - interest earned on that interest
It is simple interest - interest earned on that interest
It's not different; they are one and the same
3
Which is NOT a good reason to invest in and index fund?
Have an investment with low fees
Don't have to monitor as closely as active managed account
Have a diversified portfolio
You want to "beat the market"
4
Jesse bought 5 shares of Pasta Palace for $10. Then he sold all 5 shares for $15. What was his profit or loss?
Profit of $25
Profit of $5
Loss of $25
Loss of $5
5
Why is it important to start investing as soon as possible?
Fees on investments are cheaper when you are younger
Investing is an easy way to make quick money
You take less risk when you are young, so money will be safe
You have more time for your money to compound
6
Ms. Zhao does NOT like
Bugs
Video games
Eating noodles
Scuba diving
7
Which of the following factors will most likely INCREASE the overall cost of your loan?
A lower interest rate
A longer loan term
A higher credit score
Paying a higher down payment
8
How does the 50/30/20 rule of thumb for budgeting allocate your income?
50% Wants, 30% Needs, 20% Goals
50% Goals, 30% Wants, 20% Needs
50% Needs, 30% Wants, 20% Goals
50% Needs, 30% Goals, 20% Wants
9
What may NOT impact the interest rate on your loans?
The length of the loan
Your level of education
Your credit score
The loan amount
10
Which of the following in NOT considered as an investment?
Real Estate
Mutual Funds
Credit Card
Bonds
11
How does inflation impact the money in your savings account?
Inflation increases the value of the money
Inflation decreases only the money you earn in interest
The purchasing power of your money decreases over time
Inflation has no impact on the money in your savings account.
12
Which is NOT a typical goal for a savings account?
To buy groceries for this week
To pay for higher education
To save for a new car
To create an emergency fund
13
What is the main appeal of an index fund?
They are typically low cost and diversified investments
They are always managed by a robo-advisor to remove human bias
They give you partial ownership of a single company
They are always actively managed to add a human touch
14
A diversified portfolio is desirable because
It limits investment choices
It's a good predictor on rate of return
It increases risk and return
It decreases risk
15
Which of the following is typically a SECURED loan?
Student loan
Personal loan
Credit Card Balance
Auto loan
16
Assuming a rate of growth of 8%, in how many years will your money double?
9 years
12 years
3 years
6 years
17
A shorter auto loan term means ____ monthly payments & ____ total interest you'll pay.
higher, more
lower, less
higher, less
lower, more
18
Which of the following is NOT included in a Shumer Box
Your Credit Limit
Annual Fee
Late Payment Fee
APR for Cash Advance
19
A _____ is a loan given to an organization while a _______ is partial ownership in the company.
bond, stock
stock, bond
ETF, bond
bond, ETF
20
Which would be considered the highest risk investment type?
Bond
Mutual Fund
Stock
Certificate of Deposit (CD)

Investing and Financial Literacy Flashcards | StudBud