Saving & Investing Unit Test

Front

Why is a dollar received today considered more valuable than a dollar received in the future?

Back

Because money available now can be invested to earn returns, making it worth more than the same amount in the future.

Front

Which of the following is NOT a factor that contributes to the time value of money?
Interest rates,
Inflation,
Risk premium,
Sunk cost

Back

Sunk cost

Front

What is the nominal return on an investment?

Back

The raw percentage increase or decrease in the value of an investment.

Front

What is the process of earning interest on both the initial principal and the accumulated interest from previous periods?

Back

The process of earning interest on both the initial principal and the accumulated interest from previous periods.

Front

What does the term 'Future Value' signify in finance?

Back

The projected worth of an investment at a future date.

Front

What is a key reason for prioritizing saving money?

Back

It offers a sense of financial stability and reassurance.

Front

What are three key motivations for building a savings fund?

Back

Emergency situations, retirement planning, and the benefits of compound interest.

Front

What is a key benefit of beginning to save for retirement at a young age?

Back

Starting early can lead to a more secure financial future.

Front

What is the 50/30/20 rule in personal finance?

Back

It divides income into 50% for essentials, 30% for discretionary spending, and 20% for savings.

Front

Why is it important to have a financial safety net?

Back

To handle unforeseen costs such as emergency home repairs or sudden job loss.