Personal Finance - Savings and Investing

When taking advantage of the time value of money, which of the following is most likely to result in the largest amount of return.

• Invest a large principal amount of money and then make no additional investment.
• Invest as long as possible for the highest rate possible.
• Invest a small amount of money for a short period of time at the highest interest rate possible.

Simple interest is best defined as:  

• Interest earned on the principal investment.
• Any form of interest paid from saving and investing.
• Earning interest on interest.
• The effect interest has on the total return on investment.

Which shows the best understanding of compound interest?

• Interest earned on the principal investment.
• any form of interest earned from saving or investing.
• Earning interest on interest.
• The effect interest has the the total return on interest.

What does "pay yourself first" mean?

• A person should save whatever money is left over after paying the bills.
• An individual sets aside a predetermined portion for savings before spending. 
• An individual should spend some money on his or her wants prior to saving.

When a goal has been set to save $100 a month for an emergency fund of 2000,00, giving up food from a vending machine is an example of a 

• opportunity cost
• interest
• the part of the goal that makes it attainable.
• trade-off

In relations to others options, how liquid is a savings account?

• More liquid than cash
• less liquid than a mutual fund.
• more liquid that a certificate of deposit (CD).
• More liquid than a checking account.

You need a savings tool that is liquid and accessible, which one should you choose?

• Certificate of Deposit
• Checking account
• Money Market deposit account
• All three are correct

How much do financial investors recommend that individuals keep in a savings account for emergencies?

• 1 month of expenses
• 3 months of expenses
• 6 months of expenses
• 12 months of expenses

Which of the following is a feature of a Certificate of Deposit (CD).

• Funds deposited in a CD are held for a certain length of time.
• funds deposited in a CD have tiered interest rates
• funds deposited in a CD are very liquid
• funds that are deposited in a CD can be accessed via check or debit card

What are some examples of savings tools?

• Savings account, money market deposit account, certificate of deposit, and interest-earning checking account
• Money market deposit account, savings account, interest-earning checking account, credit card account and savings bond.
• Stocks, mutual funds, money market deposit account, real estate and junk bonds account, and certificate of deposit.
• Interest-earning checking account, money market deposit account, mutual fund, credit card