Personal Finance Final Review

Which of the following are two mandatory categories of government spending that are paid for by FICA taxes? Mark only one oval.

• Military and Education

• Health and Veterans’ Benefits

• Housing and Transportation

• Social Security and Medicare

Which word represents the total cost of the item you’re purchasing on credit minus any down payment you make upfront? Mark only one oval.

• Principal

• Term

• Interest rate

• APR

Behavioral economics…

• Is a field of economics that studies people who make rational and objective decisions

• Analyzes how different economies around the world behave over time

• Tracks and examines stock market trends over a certain period of time

• Combines economics and psychology to study why people behave the way they do in the real world

Which of the following is typically a feature of a savings account but not a checking account?

• Ability to withdraw money from an ATM

• FDIC insured up to $250,000

• Your money earns interest

• Ease of making payments using a debit card

How does investing in the stock market differ from putting money in a savings account at a bank?

• Investing is always a less risky option than saving

• Investing is best for short-term situations like emergency funds; saving is best for the long-term

• Investing typically earns between 1-2% while saving generally earns between 5-7%

• Investing allows you to accumulate wealth for retirement while saving is best for short-term purchases or emergencies

Which of the following statements is TRUE about compound interest?

• Compound interest is difficult to calculate, so those who use it earn higher profits for their efforts

• Compound interest means you have a fund manager who is compounding your returns without charging a fee

• Compound interest allows you to earn interest not only on the amount you have saved, but also on the interest you've already earned

• Compound interest directly impacts how much you will be charged in fees

Daniel has saved $2,000 in a savings account that earns 0.5% interest annually. What will most likely happen to the purchasing power of his savings over time?

• His purchasing power will DECREASE because the interest rate is lower than the historical rate of inflation

• His purchasing power will INCREASE because the interest rate is higher than the historical rate of inflation

• His purchasing power will INCREASE because the interest will compound faster than the historical rate of inflation

• His purchasing power will remain the SAME because the interest rate is the same as the historical rate of inflation

Which of the following accurately describes a difference between an individual bond compared to a bond fund?

• A bond pays you dividends while a bond fund pays you regular interest

• A bond guarantees you a higher rate of return than a bond fund

• A bond is issued by a company while bond funds only invest in government bonds

• A bond is considered to be a less diversified investment than a bond fund

Which of the following statements about Exchange Traded Funds (ETFs) is TRUE? Mark only one oval.

• ETFs are traded once a day after the market closes

• An ETF is a single stock that you can buy in the stock market

• Actively managed ETFs have very low fees

• ETF prices can change throughout the day as they are exchanged on the market

You bought 10 shares of stock in StreamingVideoCo for $45 per share. Two months later you sold the 10 shares of stock for $80 per share. What was your profit or loss on StreamingVideoCo stock? (Assume that StreamingVideoCo didn't pay a dividend and that you didn't incur any trading fees during that period.) Mark only one oval.

• Loss of $800

• Profit of $350

• Loss of $450

• Profit of $800