Personal Finance Exam on Financial Literacy for College

What are the different types of college savings accounts?

• Roth IRA, Traditional IRA, SEP IRA

• 529 plans, Coverdell Education Savings Accounts (ESAs), and custodial accounts (UTMA/UGMA)

• 401(k), Pension plan, Annuity

• Checking account, Savings account, Money market account

What are the various financial aid options available for college students?

• Borrowing from friends and family

• Credit card debt

• Selling personal belongings

• Scholarships, grants, work-study programs, and student loans

How can students compare different student loan options?

• Asking friends for their opinions

• Selecting the loan with the highest interest rate

• Choosing the loan with the longest repayment term

• Researching and comparing interest rates, repayment terms, and any additional fees or benefits offered by each loan provider.

What are the factors to consider in consumer decision making when it comes to college expenses?

• Color of the college buildings

• Cost, financial aid, reputation of the college, potential return on investment, location, and available resources.

• Number of students enrolled in the college

• The college's mascot

What are the basic functions of banking in relation to personal finance?

• The basic functions of banking in relation to personal finance include accepting deposits, providing loans, facilitating payments, and offering financial advice and services.

• Selling insurance products

• Operating as a retail store

• Providing legal services

Explain the concept of compound interest and its relevance to saving for college.

• Compound interest only applies to short-term savings

• Compound interest is irrelevant to saving for college

• Compound interest allows savings to grow at a faster rate over time.

• Compound interest causes savings to decrease over time

What are the potential drawbacks of taking out student loans?

• Potential drawbacks include accumulating interest, repayment obligations, and impact on credit score.

• No interest accumulation

• No repayment obligations

• No impact on credit score

How can students prioritize their spending to save for college?

• By ignoring their expenses and hoping for the best

• By spending all their money on entertainment

• By creating a budget and cutting unnecessary expenses

• By taking out multiple loans

What are the key differences between federal and private student loans?

• Interest rates, repayment options, and eligibility requirements

• Loan amount and duration

• Credit score and income

• Loan purpose and lender

What are the advantages and disadvantages of using a 529 plan for college savings?

• The advantages include no tax benefits, limited flexibility in choosing a beneficiary, and low contribution limits.

• The advantages include tax benefits, flexibility in choosing a beneficiary, and high contribution limits. The disadvantages may include limited investment options and potential penalties for non-qualified withdrawals.

• The disadvantages may include unlimited investment options and no potential penalties for non-qualified withdrawals.

• The advantages include high taxes, limited flexibility in choosing a beneficiary, and low contribution limits.