Budget Challenge Post Simulation Practice

Which is true of overdraft protection (ODP)?

• It insures that your checks will not bounce

• It is required by law for most accounts

• It is usually available free for most accounts

• It required funds to be available from a linked account

A person has $4000 to put into savings. Assuming all options were offered by the same institution, which account is likely to offer the highest interest rate?

• certificate of deposit

• checking account

• money market account

• savings account

In retirement plans, what does vesting refer to?

• The need to diversify your investments to avoid major losses in one area

• How long you have to work before employer contributions become yours

• The ability of your money to grow without having to pay tax on the earnings

• Whether the plan is managed by the employer, government or the individual

Which benefit typically costs an employer the most to provide?

• comprehensive health insurance

• one week paid vacation

• $50,000 term life insurance

• four paid sick days

Which is a drawback of being a salaried employee?

• Pay amounts vary from week to week making budgeting difficult

• Fringe benefits such as health insurance are rarely provided

• Work weeks might exceed 40 hours without additional pay

• Employers may reduce the rate of pay without notice

Which best describes compound interest?

• earning interest on your interest

• earning interest on tax deffered savings

• increasing returns through higher risk

• taking advantage of an employer match

Why is saving in a designated retirement account better than in a regular account?

• Savings in a retirement account receive a government match

• Saving in a retirement account offers significant tax benefits

• Savings in a retirement account are guaranteed against loss

• Savings in a retirement account do not count toward FICA

Which is the best strategy when considering an employer matching retirement plan?

• Check on the returns of individual retirement plan options first

• Invest as much as possible in the stock of the company you work for

• Contribute enough to get the full employer match since it's free money

• Contribute enough to get 10% of the match and increase gradually over time

Which best describes the purpose of insurance for in insured?

• A way to profit from an unfortunate circumstance

• A way to prevent bad things from happening

• A way to save for unexpected events and retirement

• A way to manage risk that occurs as part of daily life

What is an insurance deductible?

• The total amount the insurance covers

• The amount the insured pays before the insurer pays

• The monthly payment the insurer makes for the insurance

• A percenatge of the cost of the service that the insured pays