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