Final Exam

First Name:

1. Which of these costs would be the MOST difficult to adjust if you were looking to reduce your expenses?

• Dining out at local restaurants
• Loan payment on a new car
• Expenses for new clothes
• Postponing a purchase for a big-screen TV

2. You earn a salary of $40,000 per year and decide to save 20% of your gross pay. You set a goal of creating a $16,000 emergency fund. How long will it take for you to achieve your goal?

• 6 months
• 1 year
• 2 years
• 3 years

1. Juan saved $1,000 from his summer job cleaning pools. Which of these account types would work best for him if he doesn't need access to the money for a number of years AND wants to earn the highest interest rate?

• Regular savings account
• Money Market account
• Checking account
• Certificate of Deposit

2. 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
• Save a certain percentage of each paycheck and deposit it directly into a savings account
• Cover all of your wants and needs and save whatever is left over
• Take out a payday loan so you can save before you receive your paycheck

3. 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?

• 3 months
• 9 months
• 24 months
• 30 months

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

• If the bank account is FDIC-insured, your money is safe even if the bank fails
• Many banks pay interest on the money you deposit into your savings account
• Historically, savings accounts earn higher returns than investments in the stock market
• Money in a checking account is usually easy to access via ATM, debit card or check

5. All of the following are true about prepaid cards EXCEPT…

• Prepaid cards typically include a lot of fees
• Prepaid cards are a useful option for someone who is unbanked to make online purchases
• Prepaid cards are a great way to build credit
• Prepaid cards are usually accepted anywhere that debit and credit cards are accepted

6. You are developing a savings plan and using short-, medium-, and long-term goals to motivate you. Which represents possible goals from short-term to long-term? Save for…

• Retirement, a house down payment, college tuition
• A new cell phone, college tuition, a house down payment
• A new cell phone, dinner with friends this weekend, a new bike
• Retirement, college tuition, a vacation

7. 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