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WorksheetsFoundations in Personal Finance Chapter 2 Test Review
Total questions: 50
Worksheet time: 25mins
Name
Class
Date
1.
The first thing you should save for is your retirement fund.
a)
True
b)
False
2.
You should save money for three basic reasons: emergency fund, purchases and wealth building.
a)
True
b)
False
3.
Your income level greatly affects your savings habits.
a)
True
b)
False
4.
When it comes to saving money, the amount you save is determined by how much you have left at the end of the month once all of you spending is done.
a)
True
b)
False
5.
Americans typically maintain a very high savings rate.
a)
True
b)
False
6.
You should hold off on investing for retirement until you have college or other post-secondary education paid for.
a)
True
b)
False
7.
When you're in high school, you won't have the same emergency expenses as your parents.
a)
True
b)
False
8.
An interest-bearing account is an account that generates interest income on the available balance in the account.
a)
True
b)
False
9.
Money set aside and left alone for a "rainy day."
a)
emergency fund
b)
savings account
10.
When a person intentionally invests money in a place where it can earn more money
a)
sinking fund
b)
wealth building
11.
Saving money over time for a large purchase
a)
installment loan
b)
sinking fund
12.
Save a $500 emergency fund
a)
the First Foundation
b)
the Fourth Foundation
13.
Percentage paid to a lender for the use of borrowed money, or the percentage earned on invested principal
a)
interest rate
b)
savings rate
14.
The five steps to financial success
a)
five money myths
b)
Five Foundations
15.
Money today has different buying power than the same amount of money in the future
a)
interest
b)
time value of money
16.
Compares after-tax income to the money people spend on a variety of items
a)
interest rate
b)
savings rate
17.
Interest paid on interest previously earned
a)
compound interest
b)
interest
18.
The persistent rise in the cost of goods and services
a)
deflation
b)
inflation
19.
What two things do you consider when evaluating the time value of money
a)
time and savings
b)
time and interest rate
c)
inflation and interest rate
20.
What are the essential elements of wealth building
a)
inflation and interest rate
b)
discipline, time and compound interest
c)
discipline and time
21.
Why should interest earned not be a factor with your emergency fund
a)
Inflation can eat up the interest earned
b)
Interest-bearing accounts at banks earn a high rate of interest, therefore, interest is not a concern
c)
The emergency fund is not intended to grow wealth
d)
None of the above
22.
Which of the following is a reason that people don't save money
a)
They lack discipline
b)
They do not live on a budget
c)
Have money available to lend to friends
d)
Build wealth
23.
Why is having a fully funded emergency fund so important when it comes to your financial well-being
a)
As long as you have a good-paying job, you really don't need an emergency fund
b)
The purpose of an emergency fund is to set money aside for unexpected financial emergencies
c)
The purpose of an emergency fund is to have money set aside for large purchases
d)
None of the above
24.
Which of the following is not a reason your emergency fund should be kept in a separate savings account away from your spending money
a)
So that you do not get your spending and saving money confused
b)
So that it is clear what money is only to be used for emergencies
c)
So that it is not too easy to access
d)
So that your emergency fund savings can earn a lot of interest
25.
Which of these is not a key to saving money
a)
Focus
b)
Making saving a habit and a priority
c)
Your income
d)
Discipline
26.
At your age, a fully funded emergency fund should be
a)
$500
b)
$5,000
c)
$100
d)
$1,000
27.
Using the sinking fund approach, how much do you have to save each month to buy a $4,800 car one year from now
a)
$400
b)
$300
c)
$275
d)
$500
28.
Which of the following steps is the First Foundation
a)
Get out of debt
b)
Build wealth and give
c)
Save a $500 emergency fund
d)
Pay cash for your car
29.
What does it mean to have a negative savings rate
a)
Saving for something that is a want instead of a need
b)
Having a fully funded emergency fund
c)
Having no savings at all
d)
Spending more money than you make and acquiring debt
30.
Instead of borrowing money for large purchases, you should set money aside in a __________ over time and pay with cash
a)
Emergency fund
b)
Sinking fund
c)
Credit card fund
d)
Mortgage fund
31.
Compound interest is best defined as:
a)
Interest earned on the principal investment
b)
Any form of interest earned from saving or investing
c)
Earning interest on interest
d)
The effect interest has on the total return on investment
32.
Which statement best reflects the philosophy of “pay yourself first”?
a)
An individual should save whatever money is left over after paying monthly bills
b)
An individual should pay all fixed expenses before paying flexible expenses
c)
An individual should set aside a predetermined amount of money for saving before using any of that money for spending.
d)
An individual should spend money on the items and activities enjoyed in life before paying any other expenses
33.
Harris is concerned about the effects of inflation on his investment returns. Which statement best describes inflation?
a)
The rise in the general level of prices
b)
The uncertainty about the return on an investment
c)
The number of times something happens to money
d)
The projected value of an investment at the end of a specified time frame
34.
It is best to have the rate of return on an investment _______than the rate of inflation.
a)
Lower, in order to minimize taxes
b)
Lower, in order to minimize risk
c)
Higher, to maintain purchasing power
d)
Higher, to minimize risk
35.
Saving money over time for a large purchase is a(n):
a)
emergency fund
b)
sinking fund
c)
interest fund
d)
personal finance
36.
At your age, a fully funded emergency fund should be:
a)
$1,000
b)
$5,000
c)
$100
d)
$500
37.
According to Dave, saving money is about...
a)
Pride and Greed
b)
Emotion and Contentment
c)
Saving up to show off for your friends
d)
Living the dream
38.
The percent by which your money grows is called...
a)
Principal
b)
Interest Rate / Rate of Return
c)
Compound Interest
d)
Simple Interest
39.
If something can go wrong, it will.
a)
Fate
b)
Dave's Law
c)
Bad luck
d)
Murphy's Law
40.
Instead of borrowing money for large purchases, you should set money aside in a _______ over time and pay with cash.
a)
sinking fund
b)
emergency fund
c)
credit card fund
d)
mortgage fund
41.
Initial amount of money lent, borrowed, or invested is called...
a)
Interest Rate
b)
Original
c)
Principal
d)
Total
42.
Put your emergency fund money into the same account as your checking account.
a)
True
b)
False
43.
A savings account that is set aside to be used only for emergency expenses
a)
Safety Fund
b)
Emergency Fund
c)
Savings Fund
d)
Expense Fund
44.
Interest paid on interest previously earned
a)
Simple Interest
b)
Frequent Interest
c)
Interest Account
d)
Compound Interest
45.
Saving money over time for a large purchase
a)
Savings Account
b)
Sinking Fund
c)
Checking Account
d)
Interest Bearing Account
46.
A rate which is either charged (on debt) or paid (on investment accounts) for the use of money
a)
Interest Rate
b)
Savings Rate
c)
Inflation Rate
d)
Interest Percentage
47.
The persistent increase in the cost of goods and services or the persistent decline in the purchasing power of money
a)
Deflation
b)
Interest
c)
Inflation
d)
Recession
48.
When it comes to saving money, the amount you save is determined by how much you have left at the end of the month once all of your spending is done.
a)
True
b)
False
49.
Which of the following is not one of the three basic reasons for saving money
a)
Large Purchases
b)
Have money available to lend to friends
c)
Emergency Fund
d)
Build Wealth
50.
What two things do you consider when evaluating the time value of money?
a)
Opportunity Cost and Price
b)
Inflation and Interest Earned
c)
Sales Price and Cost of Goods
d)
Interest and Sale Price
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