Pre-Test (English)

Which of the following is an effective strategy for personal saving?

• Wait until the end of the month and save whatever is left in your checking account

• Take out a payday loan so you can save before you receive your paycheck

• Cover all of your wants and needs and save whatever is left over

• Save a certain percentage of each paycheck and deposit it directly into a savings account

Joelle wants to have an emergency fund to cover 6 months of her expenses. Her monthly gross pay is $4,000 and her monthly expenses are $2,000. If she plans to save 10% of her gross pay each month, how long will it take her to build her emergency fund?

• 30 months

• 3 months

• 9 months

• 24 months

All of the following statements about bank accounts are true EXCEPT…

• Historically, savings accounts earn higher returns than investments in the stock market

• If the bank is FDIC-insured, your money, up to the FDIC limit, is safe even if the bank fails

• Many banks pay interest on the money you deposit into your savings account

• Money in a checking account is usually easy to access via ATM, debit card or check

1. Fill in the blanks with the correct responses.  If you follow the 50-30-20 rule of budgeting, you'll be putting 50% of your monthly income toward _______________, 30% of your monthly income toward _____________, and 20% of your monthly income toward ______________. 

• Needs, wants, savings

• Savings, needs, wants

• Needs, savings, wants

• Wants, needs, savings

Experts recommend that you accumulate enough to cover 3 to 6 __________________ of expenses in your emergency fund. 

• Months

• Days

• Weeks

• Years

Which represents the BEST time to start saving for your retirement? 

• As soon as you have your first full-time job

• Right after you pay off your student loans

• Once you are debt-free, including paying off all credit cards, auto loans, and your mortgage

• At age 45, so you have exactly 20 years until retirement

You are at the checkout counter at the local supermarket and use your debit card to pay for your groceries. Where does the money for this purchase come from?

• It is deducted directly from your checking account

• Your credit card company covers the cost

• Your credit card company provides you with a cash advance to cover the cost

• It is deducted directly from your savings account

Which of the statements below BEST describes the relationship between risk and return when considering an investment?

• Investors expect to earn a higher return when they invest in a high risk asset

• Investors expect to earn a lower return when they invest in a high risk asset

• Investors expect to earn a higher return when they invest in a low risk asset

• Investors expect to earn zero return when investing in a low risk asset

How is a bond different from a stock?

• A bond is a loan you give to an organization while a stock is partial ownership in a company

• Bonds are typically riskier than stocks but have the potential to earn higher returns

• Bonds are usually issued by smaller startup companies while stocks are issued by well established organizations

• Bonds are best for earning high returns while stocks are best for providing a stable source of income

As a shareholder in a public company, what are the benefits available to you?

• You may receive dividends from the company, if the company pays them, and you have ownership of a portion of the company

• You must receive dividends from the company (all companies must pay them) and you can select members of the management team (e.g., the Chief Executive Officer (CEO))

• You have ownership of a portion of the company and receive coupon payments from the issuer

• You can select members of the management team [e.g., the Chief Executive Officer (CEO)] and vote for members of the Board of Directors