Personal Finance Objective 5.01 Saving

Kylee’s Personal Finance class When has been discussing the importance of understanding liquidity and she is trying to explain the term to another student. Which statement is most correct description of liquidity?

• How quickly and easily an asset can be converted into cash.

• The amount of savings available.

• A measurement of how much a person or household owns once all debts have been

  paid

• The amount of money needed to pay for the necessities and comforts currently enjoyed

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

• Invest a large principal amount of money and then make no additional investments.

• Invest as long as possible and at the highest interest rate possible.

• Invest a small amount of money for a short period of time at the highest interest rate possible.

• Invest at a high interest rate because interest is the only factor that affects return.

Compound interest is best defined as:

• Interest earned on the principal investment

• Any form of interest earned from saving or investing

• Earning interest on interest

• The effect interest has on the total return on investment

Dylan is preparing a presentation about saving and the presentation rubric says that he must include an explanation of compounding interest. Which of the following statements would be the best one to include in his presentation to show that he understands compounding interest?

• Interest earned on the principal investment.

• Any form of interest earned from saving or investing.

• The effect interest has on the total return on investment.

• Earning interest on interest.

When a goal has been set to save $100.00 a month for an emergency fund of $2000.00, giving up food from the vending machine to achieve that goal is the:

• Opportunity Cost

• Interest

• Specific part of the SMART goal.

• Trade-off

Which statement best reflects the philosophy of “pay yourself first”?

• An individual should save whatever money is left over after paying monthly bills.

• An individual should pay all fixed expenses before paying flexible expenses.

• An individual should set aside a predetermined amount of money for saving before using any of that money for spending.

• An individual should spend money on the items and activities enjoyed in life before paying any other expenses

Which answer best describes why it is important to save money?

• Emergencies (i.e. washing machine breaks)

• Financial security (lowers stress)

• Short term goals (buying a new IPAD)

• All of the above

Diana has faced the fact that she and her family need to explore assistance programs they might qualify for during the time she must be off work following an accident. How might she and her family locate an appropriate program?

• Call the Social Security Administration

• Contact her local bank

• Go to www.govbenefits.gov

• Inquire at the local food pantry

Individuals with more formal educational training usually have:

• Higher estimated lifetime earnings

• Lower personal satisfaction

• Greater amounts of leisure time

• More comfortable work environments.

Carson’s family has always struggled financially due to his parents’ leaving high school before graduating and working lower paying jobs to support the family. His parents don’t want him to make the same mistake and are encouraging him to apply for scholarships and any type of student aid he might qualify for. Which application will determine which typed of need‐based aid he will qualify for?

• Perkins Federal Loan Application

• Direct Subsidized Stafford Loan Application

• Federal Work Study Application

• Free Application for Federal Student Aid (FAFSA)