Study Guide #2 APF 2025

What is the primary purpose of a bank statement?

• To outline all account transactions in a given month

• To provide investment advice on which deposit accounts are best

• To serve as a formal tax return document to be submitted to the IRS

• To offer promotional offers

What is income?

• Money received from government transfer payments.

• Money an individual or business earns or receives as the result of economic activity.

• Money inherited from family members.

• Money an individual or business saves after paying all non discretionary expenses.

What does FICA stand for?

• Federal Income Collection Agency

• Federal Insurance Contributions Act

• Federal Internal Commerce Act

• Federal Infrastructure and Community Act

Which type of tax is collected at the point of sale?

• Sales tax

• Income tax

• Property tax

• Estate tax

How does the 50/30/20 rule work in budgeting?

• It allocates 50% for needs, 30% for wants, and 20% for savings.

• It allocates 30% for needs, 50% for wants, and 20% for savings.

• It suggests saving 50% of your income and spending the rest on needs and wants.

• It eliminates the need for tracking expenses.

What is the purpose of setting up an emergency fund?

• To invest in high-risk stocks.

• To cover unexpected expenses like medical bills and car repairs.

• To cover discretionary expenses like travel expenses and a new phone.

• To be able to go on a nice trip to Las Vegas.

Which type of investment is considered low risk?

• A bank savings account

• A publicly traded stock

• Real estate investment

• Corporate bonds

The U.S. government agency responsible for regulating the financial markets is:

• Federal Reserve

• Internal Revenue Service (IRS)

• Securities and Exchange Commission (SEC)

• Federal Deposit Insurance Corporation (FDIC)

What is the primary difference between "credit" and "debt"?

• Credit is the ability to borrow money, while debt is the amount of money borrowed.

• Credit is the amount of money borrowed, while debt is the ability to borrow money.

• Credit and debt are the same, used interchangeably.

• Debt is the interest charged on borrowed money, while credit is the loan itself.

What is a significant drawback of accumulating too much debt?

• It guarantees lower interest rates on future loans.

• It can lead to financial stress and mental health issues.

• It helps you establish a strong credit score.

• It makes saving for the future easier.