Finance - Exam 1
Money only make you happy if a. There is enough to survive b. You use it to do good and are responsible with it c. You have more than everyone else in your social group d. All of the above
d
The FDIC for banks and NCUSIF for credit unions insure savings accounts up to what amount? a. $50,000 b. $100,000 c. $200,000 d. $250,000
d
The process whereby the value of an investment increases exponentially over time is called: a. annual percentage rate b. time value c. annual percentage yield d. compounding
d
To create an accurate budget, you should a. Keep a spending journal b. Use budget templates c. Discuss budget goals with spouse or housemates d. All of the above
d
What is compounding of interest? a. The initial deposit b. Money in a savings account c. Interest found in a savings account d. Interest on interest added to an initial deposit
d
What rule(s) is (are) a good way to allocate your money? a. 80-10-10 rule b. 90-10 rules c. 70-30 rules d. both 80-10 and 90-10 are good ways to allocate money
d
Which of the following are reasons for keeping a spending journal? a. To become more aware of what you are buying and how much it costs b. To help you think about the value of what you are buying before you spend c. To track where your money goes so you can stop the "little leaks" by making changes in your spending habits d. All of the above
d
Internet banking allows you to a. check the balances in your accounts. b. deposit checks. c. deposit cash. d. all of the options are correct.
d
A 529 plan is a. funds set aside to go toward post-secondary education expenses. b. an account which allows the holder to write checks against deposited funds. c. funds set aside to be withdrawn after age 59.5 without penalty. d. a plan where taxes are not paid on the money or interest earned until the year it is withdrawn.
a
An easy form of sticking to a budget is to have envelopes for every category in your budget and to place cash in each envelope to match your budgeted amount a. true b. false
a
An example of "passive income" is: a. Income received from your investments b. Income received from your part-time job, where you do nothing c. Money received from an inheritance d. Lottery winnings
a
How quickly an asset can be turned into cash is known as: a. Liquidity b. Liability c. Net worth d. Asset to cash ratio (ATC)
a
Income received from investments and savings is called: a. Passive income b. Financial income c. Incurred income d. Non earned income
a
Is it worth it, from a financial perspective, to go to college and pursue a degree? a. Yes - your future earrings will more than make up for the opportunity costs involved b. No - college can cost too much to make it a good investment c. If you plan to study hard and get good grades d. If you do not have to borrow money to pay for it
a
The difference between a Roth IRA and a traditional IRA is a. a roth IRA contribution is made after you pay tax on the money you deposit. b. a traditional IRA contribution is made after you pay tax on the money you deposit. c. roth IRA contributions are made with pretax money. d. with a traditional IRA, you never have to pay tax.
a
The main opportunity cost of going to college is a. Money you would have earned working instead, in addition to the cost of attending b. The cost to attend college c. Loss of time with friends d. Cost of trips, classes, and things that come up that wouldn't have if you hadn't gone to school
a
What does the S in SMART stand for? a. Specific b. Standard c. Superfluous d. Simple
a
What gives money its value? a. Supply and demand b. Backed by gold c. Backed by silver d. Present values
a
What is a credit union? a. A not-for-profit depository institution that serves members who have a common affiliation b. A financial institution that accepts deposits and uses the funds to provide private business and personal loans c. A group of workers who pay union dues for credit d. A place where it snows
a
What is a debit card? a. A card that carries a credit card logo and is tied to a checking account b. A card known as a bank card or a cash card that does not include a credit card logo c. A card that has a minimum line of credit d. A loan card provided by a bank after being approved by a loan officer
a
What is a financial independence? a. When a passive income exceeds expenditures b. When you don't live your parents c. When you get a job d. When you have $1 million in retirement savings
a
What is a good way to keep track of spending? a. Keep a spending journal b. Don't think; just spend c. Have your parents pay for everything d. Trust someone else to keep track of it for you
a
What is a lump sum? a. A single, one-time payment b. All of your money is put together in a pile c. A series of equal payments that are made at equal intervals over time d. The value of an amount based on the interest rate
a
What is earning interest on interest? a. Compounding b. APR (annual percentage rate) c. Savings d. Investing
a
Which financial institution would be the best fit for a college-aged student who needs a checking account? a. Commercial bank b. Credit union c. Savings institution d. All of the options are correct
a
Why should you want to do a job? a. Because it makes you happy b. Because it has a big salary c. Because there are a lot of benefits d. Because you are bored
a
A good way to save money is to create a budget and then save whatever amount is left over at the end of each month a. true b. false
b
A personal cash flow statement measures a. Cash inflows only b. Cash inflows and outflows c. Cash outflows only d. How much cash you have on hand
b
All of the following are related to the time value of money except a. FVIF. b. PVIFI. c. PVIF. d. FVIFA.
b
An ordinary annuity is a a. stream of unequal payments that occurs at the end of a period. b. stream of equal payments that occurs at the end of a period. c. stream of equal payments that occurs at the beginning of a period. d. stream of unequal payments that occurs at the beginning of a period
b
How many years should it take to attain intermediate goals? a. Less than 1 year b. 1-5 years c. more than 5 years d. over your lifespan
b
If you are investing a stream of equal payments that occur at the beginning of each month, what type of investing is this called? a. Lump sum b. Annuity due c. Discounting d. Ordinary annuity
b
Sustainable consumption is: a. Consuming more than you can afford b. Making thoughtful choices about what you can afford, and sticking to it c. Living in poverty d. Taking out a loan to sustain yourself
b
The 80-10-10 rule requires that you a. save 80% of your income, give away 10%, and live on 10%. b. live on 80% of your income, save 10%, and give away 10%. c. give away 80% of your income, put 10% in savings, and live on 10%. d. live on 80% of your income, save 10%, and invest 10%.
b
The more specific your goals are, a. The more work they are b. The more likely they will be achieved c. The more fun they are d. The less likely they will be achieved
b
To be frugal includes all of the following except: a. Being resourceful when satisfying your need for goods and services b. Buying all the things you want c. Using already owned items d. Practicing restraint in how you consume goods and services
b
What do you call a stream of equal payments received or paid at equal intervals in time? a. A lump sum b. An annuity c. Discounting d. Future value
b
What is a not a way to save money? a. Pay yourself first b. Use credit cards and debit cards exclusively c. Automatically transfer money to savings and investments d. Sit down and create a budget each week or month and follow it
b
What is opportunity cost? a. The cost of purchasing items on credit and having to pay it off in the future b. The cost of an alternative that must be forgone in order to pursue another option c. Spending money today without considering other alternatives d. Failing to stop the "little leaks" in your budget, which results in failing to meet your financial goals
b
What is the first step in setting the foundation for your financial plan? a. Understanding you values and goals b. Understanding your current relationship with money c. Identifying your current relationship with money d. Establishing your mission statement
b
Where do most variances happen in building and sticking to a budget? a. Amount of monthly income b. Amount of variable monthly expenses, like entertainment c. Amount of cash in the bank d. Amount of fixed monthly expenses, like rent
b
Which example indicates discounting? a. Looking for less inexpensive options when shopping b. Figuring out how much money to invest now to have a certain amount in the future c. Shoplifting d. All of the options are correct.
b
Which of the following correctly defines future value? a. The current value of a said future amount based on the interest rate and time in the account. b. The value of an amount at a future date based on the interest rate and time in the account. c. A single, one-time payment. d. A series of equal payments that are made at equal intervals over time.
b
_________________ are similar to 401(k) plans as they are both funded with pretax earnings. a. Roth IRAs b. Traditional IRAs c. Certificates of deposit d. Mutual funds
b
Electronic bill paying allows you to a. check the balances in your accounts. b. deposit checks. c. pay your bills online. d. all of the options are correct
c
Paper money is printed by the _________________. a. Federal Reserve Bank b. United States Treasury c. Bureau of Engraving and Printing in Washington D.C. and Fort Worth, TX d. Fort Knox Mint
c
The acronym for setting good goals is SMART. What does each letter in SMARt stand for? a. Smart, measurable, attainable, real, time b. Specific, measurable, attainable, reliable, time c. Specific, measureable, attainable, realistic, time d. Serious, measurable, attainable, reachable, time
c
There are 5 stages that make up a person's personal finance life stages. In which of these stages would a person start a 401(k) or retirement plan? a. Dependent life stage b. Independent life stage c. Early family life stage d. Empty nest life e. Retirement life stage
c
What is a budget? a. A checkbook b. The balance you have at the end of every month c. Estimated income and expenditures in a given period d. Something you don't need
c
What is a savings account designed for? a. Spending money b. Counting money c. Saving money d. Investing money
c
What is paper money backed by? a. Gold b. Gold and silver c. The full faith and credit of the U.S. government and the Federal Reserve Bank d. Silver
c
When interest is added to your initial deposit and you begin to earn interest on interest, this is known as a. the annual percentage rate. b. the time value of money. c. compounding. d. the future value of money.
c
Which of the following is not included in the dependent life stage? a. Certificate of deposit b. College savings plan c. Student loans d. Savings account
c
With most auto loans, what is used as collateral? a. Certificate of deposit b. Stock c. The purchased auto d. No collateral is needed because of your outstanding credit.
c
Accounts that are opened in the dependent life stage include a. savings. b. college savings. c. IRA. d. both savings and college savings accounts
d
All of the following are methods of saving money except a. Paying yourself first b. Stopping "little leaks" and making big adjustments c. Maintaining a mode of sustainable consumption d. All of the above
d
Debit cards a. limit fraudulent charges on your card regardless of how quickly you report the charge. b. build a solid savings foundation. c. prevent fraudsters from draining your bank account if lost. d. should be reported lost or stolen within 48 hours to limit your liability
d
Identify the importance of a financial plans: a. You may discover your passion and a sense of purpose in life b. You establish priorities in life c. You gain control over your time and money d. All of the options are correct
d
In banking terminology, CD stands for a. compact disk. b. cash on deliver. c. cash deposit. d. certificate of deposit
d
Which of the following are reasons for putting money into a CD (certificate of deposit)? a. To earn a higher rate of interest on your savings than would typically be earned if savings were placed in one's checking account or standard savings account b. To establish a solid savings foundation if you are not going to use the money for a longer period of time c. To have a safe place to store savings while still being able to make frequent withdrawals from the account penalty-free d. Both to earn more interest and to put money you don't plan to use in the short-term to work
d
Which of the following is NOT an example of sustainable consumption? a. Growing your own vegetables and herbs b. Adjusting your thermostat to use less energy while you are gone during the day and are sleeping at night c. Unplugging lamps that rarely get used d. Keeping the lights on while you are not home or when you leave the room to show that someone is home
d
Which of the following plans is not incorporated in a financial plan? a. Budget plan b. Investment plan c. Estate plan d. Education plan
d
