Which of the following is an effective strategy for personal saving? Options: Wait until the end of the month and save whatever is left in your checking account, Save a certain percentage of each paycheck and deposit it directly into a savings account, Cover all of your wants and needs and save whatever is left over, Take out a payday loan so you can save before you receive your paycheck

Save a certain percentage of each paycheck and deposit it directly into a savings account

All of the following statements about bank accounts are true EXCEPT… If the bank account is FDIC-insured, your money is safe if the bank fails Many banks pay interest on the money you keep in your savings account You can write a check with the money deposited into your Savings Account Money in a checking account is usually easy to access via ATM, debit card or check

You can write a check with the money deposited into your Savings Account

Which represents the BEST time to start saving for your retirement?

As soon as you have your first full-time job

Which statement best describes a savings account? Options: This account offers a convenient way to pay bills and access cash from an ATM, This account pays you interest on money you have put away for later to help your money grow, This account is automatically debited when you use a debit card, This account typically allows an unlimited number of transactions per month

This account pays you interest on money you have put away for later to help your money grow

Jocelyn gets a text alert from the bank that her account balance has dropped below $100 after a series of $20 ATM withdrawals. She has not used her ATM in over a week and wonders what she should do. What would you recommend?

Contact her bank immediately as it appears that her account may have been hacked.

Which of the following transactions will REDUCE your checking account balance immediately? Writing your monthly rent check which you will mail tomorrow, Using your debit card to pay for groceries at the supermarket, Using your credit card to pay for your school books, Depositing a check at a local bank branch

Using your debit card to pay for groceries at the supermarket

Protection for bank customers’ deposits up to $250,000, guaranteeing their money is still available if the bank goes out of business

All of the following are downsides of being unbanked EXCEPT: - Lack of access to credit - Lost time paying bills - Difficulty making cashless purchases

Lack of fees associated with banks

What goes in the highlighted area? Options: The Checking Account Number, Signature, Dollar Amount spelled Alphabetically, Address and Name of the Check Payee

Dollar Amount spelled Alphabetically

What kinds of behaviors can PREVENT people from making smart investing decisions? Exiting the market because that’s what everyone else is doing

Exiting the market because that’s what everyone else is doing

Which of the statements below BEST describes the relationship between risk and return when considering an investment? Investors expect to earn a lower return when they invest in a high risk asset , Investors expect to earn a higher return when they invest in a low risk asset , Investors expect to earn a higher return when they invest in a high risk asset , Investors expect to earn zero return when investing in a low risk asset

Investors expect to earn a higher return when they invest in a high risk asset

Why is diversification a recommended investment strategy?

Diversifying your portfolio helps reduce risk.

How is a bond different from a stock?

A bond is a loan you give to an organization while a stock is partial ownership in a company.

How can someone make money from investing in a stock?

They receive dividends or they sell the stock at a higher price than what they bought it for.

What is a brokerage account used for?

It’s a type of account used to buy and sell stocks, bonds, and funds.

What is one question an investor should ask when deciding whether or not they would like to open a Roth IRA or a Traditional IRA?

Do I want to pay taxes now or later?

Which of the following statements is TRUE about compound interest? - Compound interest is difficult to calculate, so those who use it earn higher profits for their efforts - Compound interest means you have a fund manager who is compounding your returns without charging a fee - Compound interest allows you to earn interest not only on the amount you have saved, but also on the interest you've already earned - Compound interest directly impacts how much you will be charged in fees

Compound interest allows you to earn interest not only on the amount you have saved, but also on the interest you've already earned

Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan? Options: Amortized loans typically have much higher interest rates than credit cards, so they're the best place to put your extra cash; The extra payment will be applied to the interest you owe, which will reduce the overall cost of your loan; The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly; Every time you pay extra, the lender will reduce the interest rate they're charging by a small amount.

The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly

Reading through a credit card’s Schumer Box, you see the APR for a specific card is set at 9.99% - 23.99%. Which statement is true?

Your APR will be within that range, depending on the strength of your credit history

What is an advantage of using a credit card?

You can make an emergency purchase that you otherwise don’t have the money to pay for right now

PFL - Final Review Flashcards

Student preview

70 questions

Show all answers

1.

FLASHCARD QUESTION

Front

Which of the following best describes what a cognitive bias is? A rational decision that is based on research and facts, The belief that we are right until someone provides information that contradicts our belief, An error in the way we think that can influence our decisions, The belief that a person should change their opinions when new facts arise

Back

An error in the way we think that can influence our decisions

2.

FLASHCARD QUESTION

Front

Unlike traditional economics, behavioral economics believes that…

Back

People do not always behave in a rational way when making economic decisions

3.

FLASHCARD QUESTION

Front

People who experience FOMO may...

Back

Go into debt to keep up with everyone else

4.

FLASHCARD QUESTION

Front

When using social media, it's important to remember that...

Back

People typically only post about the best parts of their lives on social media

5.

FLASHCARD QUESTION

Front

The pain of losing a $20 bill is felt more than the joy of finding it. This is a result of...

Back

Loss aversion

6.

FLASHCARD QUESTION

Front

Overconfidence bias may lead the majority of Americans to think that they are…

Back

Above average drivers

7.

FLASHCARD QUESTION

Front

Investments of time, effort, and money that cannot be recovered are...

Back

Sunk costs

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