FL: Chapter 5 Review

Which of the following strategies will help make your savings grow?

• Pay yourself only with discretionary money after all bills are paid.

• Make savings a regular part of your budget.

• Make frequent withdrawals.

• Choose accounts with low interest rates.

A payroll savings plan (PSP) is another application of which strategy?

• time value of money

• Rule of 72

• compounding interest

• pay yourself first

How long should the money in your emergency fund cover?

• one year

• eight to ten months

• six months

• three months

Restrictions and penalties can affect an account's _____.

• earnings

• ownership

• frequency of interest compounding

• interest rate

Which of the following items is not characteristic of a passbook savings account?

• unlimited withdrawals

• few fees

• requires a high minimum balance

• low interest rate

Which savings product requires a person to commit his or her money for the longest period of time?

• interest-bearing savings account

• high-yield savings account

• passbook savings account

• certificate of deposit (CD)

Which of the following is necessary to use the Rule of 72?

• A minimum of 25 years.

• An interest rate of 10% or more.

• A fixed interest rate.

• A minimum of $5,000

Which form states the total interest earned during a tax year?

• Form 1040

• Form 1099-INT

• Form W-2

• Form W-4

What is the ability of an individual to meet essential needs without taking on more debt that can be repaid?

• Financial security

• SMART goal

• Statement savings account

• Compound interest

Which term describes being free of certain taxes?

• Brokerage firm

• Tax-exempt

• Tax-deferred

• Compound interest