Fin Lit Chapter 1

The set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources is called financial literacy.

• True

• False

Which of the following is true of a certificate of deposit?

• you can take money out of it at any time

• Money held for a specific term (3/6/9/12 months or longer)

• it usually earns a lower rate than a savings account does

• none of these are true of a CD

Which is true of a money market account?

• it earns a lower interest rate and a lower balance is required

• it earns a higher interest rate, but a higher balance required

• you cannot write checks from the account

• it is a checking account only with no savings feature

Accounts with ________ LIQUIDITY tend to have lower interest rates & lower required minimum balances

• low

• medium

• high

• none of these

Accounts with ________ LIQUIDITY tend to have higher interest rates & higher required minimum balances

• low

• high

• medium

• none of these

When should you plan financially for the future?

• as soon as you get out of high school!

• as soon as you own a home!

• as soon as you are 18!

• as soon as you start earning or receiving any kind of money-the earlier the better!

The increase of an amount of money due to earned interest or dividends is known as:

• the time value of money

• financial literacy

• opportunity cost

• financial independence

Pay Yourself First is a concept in financial literacy that means you should....

• purchase things you want before things that you need

• purchase things you need before things that you want

• make a deposit in your savings account at least every 6 months

• treat savings as an expense

The loss of potential gain from other alternatives when one alternative is chosen:

• pay yourself first

• opportunity cost

• time value of money

• none of these

If you can choose between going out with your friends or studying for a test, and you choose to study for the test, what is the opportunity cost of that decision?

• you might get a better grade on the test

• you might fail the test

• you miss out on the experience of going out with your friends

• none of these