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Total questions: 80
Worksheet time: 20hrs 0mins
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 our returns without charging a fee
Compound interest allows you to earn interest not only on the amount you have saved, but also so the interest you've already earned
Compound interest directly impacts how much you will be charged in fees
What kinds of behaviors can PREVENT people from making smart investment decisions?
Exiting the market because that's what everyone else is doing
Buying stocks when prices are low and selling them when they're high
Staying calm when the market is experiencing a downturn
Investing in a diversified portfolio instead of trying to beat the market
Which of the following statements about Exchange Traded Funds (ETFs) is TRUE?
ETFs are traded once a day after the market closes
An ETF is a single stock that you an 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.)
Loss of $800
Profit of $350
Loss of $450
Profit of $800
Why is diversification a recommended investment strategy?
Investing in a diversified portfolio guarantees that you won't lose money with your investments
Diversifying your portfolio helps reduce risk
If you tell your fund manager to use diversification, they'll charge you lower fees
If you diversify your portfolio, you will definitely earn a high return
How is a bond different from a stock?
A bond is a loan you give to an organization while a stock is partial ownership while a stock is partial ownership in a company
Bonds are typically riskier than stocks but have the potential to earn higher returns
Bonds are usually issued by smaller startup companies while stocks are issued by well established organizations
Bonds are best for earning high returns while stocks are best for providing a stable source of income
An actively manged mutual fund...
Generally has lower fees than a passively managed index fund
Is managed by a fund manager who charges a fee
Always performs better than an index fund
Is a mix of two types of stocks and two types of bonds todiversify your portfolio
How can someone make money from investing in a stock?
They reveive dividends or they sell the stock at a higher price than what they bought it for
They sell the stock for a lower price than what they bought it for
The stock loses value but the overall market experiences a positive return
They sell the stock for the same price they bought it for
What is one question an investor should ask when deciding whether or not they would like to open a Roth IRA or a Traditional IRA?
Do I want to make a guaranteed return of 6% or 8%?
Do I want to pay taxes now or later?
Do I want to take advantage of my employer's matching contribution?
Do I want to take on more or less risk?
Sanjana is explaining what Social Security is to her younger brother. Which of the following descriptions should she use?
Social Security is a type of retirement savings plan that you can open through a brokerage firm
Social security is a government mandate that requiters employers to offer their employees a 401(k) or pension plans
Social Security is a type of retirement savings plan offered by some employers
Social Security is a government program that pools contributions from current workers to fund retirement support benefits to those who are eligible
You buy a bond with a fixed coupon rate of 5%. A year later, similar bonds that are issued have a coupon rate of 3%. Which of the following is TRUE?
The price of your bond will increase
The demand for your bond will decrease
The price of your bond will stay the same
The interest rate for your bond will fall to 3%
Which statement is try about liquidity?
The less liquid the investment, the less return
The more liquid the investment, the more the return
The more liquid the investment, the less return
All of the above
Company X's board of directors has decided to issue a portion of its earnings to its shareholders. What is this called?
Investment
Dividend
Buy-out
Yield
Savings accounts and money-market accounts are most appropriate for:
Long-term investments like retirement
Earning a high rate of return
Emergency funds and short-term goals
Savings accounts and money-market accounts should be avoided since they carry high risk
A young investor willing to take moderate risk for above-average growth would be most interested in:
Single Stocks
Bonds
Real Estate
Mutual Funds
A savings account sold by an insureance company, designed to provide payments to the holder at specified intervals, usually after retirement
Money Market
Single Stock
Annuity
Mutual Fund
Which of the following actions is the BEST way to counteract loss aversion when making a decision?
Dwelling on the potential loss you may experience for several days
Making the choice that takes on the most risk possible
Reframing the decision to focus on the potential gains instead of the potential losses
Polling a bunch of your friends and family to see what they would decide
Sebastion began day trading stocks at the beginning of the summer. After a month he made a profit of $200. Due to his short-term success and his belief that he is a highly skilled trader, Sebastion puts his entire savings into the market. This is an example of...
Overconfidence bias
The fear of missing out
Confirmation bias
The endowment effect
Investment of time, effort, and money that cannot be recovered are...
Opportunity Costs
Sunk Costs
Relevant costs
Avoidable costs
A website tells you "Only one left!" while shopping online. Which loss aversion strategy is this website using?
Coupons
Scarcity and urgency
Buy now, get free shipping
Free trials and samples
You are doing research on a new electric car that you are interested in buying. You only visit the car company's website and an online message board of electric car enthusiasts to do your research. This strategy may lead to ...
The endownment effect
Herd mentality
Confirmation bias
Loss Averison
Due to hedonic adaptation, what do you expect would happen to Anu's level of happiness after buying a new jacket?
It would initially increase, then return to a baselinelevel
It would remain at a baseline level, then increase over time
It would initially decrease, then return to a baseline level
It would remain at a baseline level, then decrease over time
You buy a stock that has a price of $50 per share. A week later the stock's price drops to $25 per share (it's lost half its value). If you are affected by loss aversion you would be likely to...
Buy more hsares
Sell the shares
Do nothing
Look for other stocks to buy
People who experience FOMO may...
Save a percentage of their paycheck each month
Donate money to a cause they care about
Go into debt to keep up with everyone else
Create and stick to a monthly budget
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
Coverall of your wants and needs and save whatever is left overq
Take out a payday loan so you can save before you reviece your paycheck
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 payent
A new cell phone, dinner with friends this weekend, a new bike
Retirement, college tuition, a vacation
Experts recommend that you accumulate enough to cover 3 to 6 _____ of expenses in your emergency fund
Days
Weeks
Months
Years
Fill in the blanks: If inflation is ____ your savings account interest rate then you will be _____ purchasing power
Higher than, gaining
Higher than, losing
Equal to , gaining
Lower than, losing
FDIC Insurance is...
Optional coverage consumers can purchase so that their bank deposits remain safe
Insurance bank branches can buy to protect their business against fraud and scams
Required if you want to do online or mobile banking
Protection for bank customers' deposits up to $250,000, guaranteeing their money is still available if the bank goes out of business
Fill in the blanks: Direct depoit typically refers to your ____ sending your ____ electronically to your bank account.
Employer, bills
employer, paycheck
parents, allowance
state government, taxes
The total estimated student loan debt outstanding (unpaid) is over:
$1 trillion
$10 thousand
$7 trillion
$1 billion
The average repayment period for a student loan is
15 years
5 years
20 years
10 years
Percentage of college students that graduate with student loans:
90%
66%
30%
25%
A form that is copleted annually by current and prospective college students to determine their eligible for financial aid
FAFSA
scholrhsip
FOS
grant
A form of financial aid that does not need to be repaid; usually awarded on the basis of academic, athletic or other achievements
grant
work study
scholarship
internship
Allows studetns to learn basic professional skills in two years or less; typically cut out many of the general courses required by traditional universities
self education
bachelor's degree
work study
trade school
Which of the fomulas below correctly calculates net price?
sticker price - student loans = net price
grants and scholarships + students loans = net price
sticker price - grants and scholarships = net price
sticker price + grants and scholarships = net price
Which of the following is considered a direct cost of attendance?
tuition
travel expenses
cell phone bill
food and entertainment
Who revieves and uses the information submitted in your FAFSA?
your employer to see if you'll still be able to work while attending college
your parents to keep track of your progress at college
the federal government for tax purposes
the schools you've applied to and your state government to determine your eligibility for financial aid
How much does it cost to file the FAFSA?
It is free
it is free the first time you file, but costs $9.99/year thereafter
it is 2% of your total loan amount
$50
Each of the following organizations offers grants to college students EXCEPT...
The federal government
FAFSA
private companies
colleges
During a period of financial hardship, you can apply for this to pause student loan payments while interest still accrues...
grace period
FAFSA
grants and scholarships
forbearance
The federal governmnet makes interest payments on _____ while you're enrolled in school at least half-time, for the first six months after you leave school, and during any period of deferment
work-study
subsidized federal loans
unsubsidized federal loans
grants
Who is eligible to revieve Direct Subsidized loans?
graduate studetns
professional students
undergraduate students
students enrolled less than half-time
The average APR for a payday loan is closes to ...
4%
14%
40%
400%
Which of the following is most likely to represent a fixed rate, secured debt?
a student loan
a credit card
a prepaid card
an auto loan
When loans are amortized, monthly payments are ___ , while the amount of your monthly payment applied to interest ___ and the amount of your monthly payment applied to the principal ____ over tie
constant, increases, increases
constant, decreases, increases
variable, decreases, increases
variable, decreases, decreases
Which of the following is true about fixed and adjustbale-rate mortgages?
Fixed-rate mortgages have a constant payment every month, but an interest rate that increases throughout the term of the loan
Fixed-rate mortgages have a fixed rate fro a few years, after which time the interest rate fluctuates according to general market conditions
Adjustable-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general marker conditions
the two mortgages work the same way but are called different names depending if they come from a bank or a credit union
A loan with a shorter term length will ahve ___ monthly payments, and you will pay ___ in total interest
higher, less
higher, more
lower, less
lower, more
An excellent credit score will help with which aspect of car financing?
bargaining for a great sales price
receiving a large down payment
qualifying for a low interest rate
having a wide selection of term lengths
Which of the following is not a factor in determining a FICO score?
getting a personal loan from the bank
paying cash for all your purchases
using credit cards
taking out a mortgage on a house
Which description is most accurate for a Zero-based budget?
you put every dollar of your net pay into a budget category each month
you spend your checking account balance down to $0 every month
you spend your saving account balance down to $0 every month
you pay every one of your bebts down to $0 every month
which one of these expenses most likely represents a VARIABLE cost in someone's budget?
electricity bill
rent
car insurance premium
student loan payment
what action corresponds to the advice "pay yourself first?"
wait until the end of the month to determine how much you have leftover to save
set aside a fraction of your paycheck into a savings account before you starts spending
spend your regular paycheck on needs and wants but funnel any extra money into savings
become self-employed so you're paying yourself instead of being paid by an employer
The defining characteristic of a job in the gig economy is...
workers are paid by the federal government
workers decide how much they want to pay in taxes
workers recieve free phones and wifi connections
workers complete short-term work for many different clients
Which statement accurately describes how the 50/20/30 Rule would break down your take-home pay?
50% on wants, 20% on savings, and 30% on needs
50% on saving, 20% on needs, and 30% on wants
50% on needs, 20% on saving, and 30% on wants
50% on saving, 20% on wants, and 30% on needs
Rent is a:
fixed expense
variable expense
intermittent expense
discretionary expensee
The zero based budget is the best method of budgeting because
this type of budget is less complicated than other types of budgets
a zero-based budget allows less money for wants
sticking to a zero-based budget requires less discipline
the zero-based budget ensures that every dollar you make is assigned a specific purpose
Why is it important to create a budget?
a budget is necessary to quality for loans and credit cards
a budget makes filing your taxes faster and simpler
a budget will help save money and prioritize your spending
a budge twill guarantee you have enough money saved for college so you won't need loans
How much money should you put toward your home's down payment?
10% of the purchase price
20% of the purchase price
3 times your monthly expenses
5 years' worth of payments
Which of the following items should a gig worker budget for that a traditional employee usually does not?
groceries and rent
taxes and health insuracne
utilities and savings
emergency fund and transportation
what is an insurance premium?
your monthly payment to your insurer, regardless of whether you use any services
a list of the procedures covered by your insurance carrier
an added cost you pay in order to revieve higher-quaility services
the amount you pay out-of-pocket for a specific procedure or service
When setting your premium, your car insurance company may consider each of the following EXCEPT...
how many miles you drive per year
your age
your driving record
your height
Someone broke into Sam's car by smashing the passenger window. Which type of auto insurance coverage will help cover the cost to get the window replaced?
bodily injury liability
property liability
collision
comprehensive
Frank has an auto policy with a coverage limit of $30,000 and a deductible of 41,000. He gets into an accident and the damages to his car total $6,200. Fortunately, he has collision coverage. How much will Frank need to pay out-of-pocket?
$0
$1,000
$6,200
$30,000
Medicaid generally provides insurance for which of the following groups of people?
the elderly or disabled
individual in low-income households
anyone who wants to buy coverage form the market
employees who have a government position
what type of auto insurance are you required to carry in almost every state (49 out of 50)?
insurance if you damage your own property
insurance if you cause injury to another person
insurance in case you get into an accident with someone who does not have insurance
insurance if you cause injury to yourself
YOur parents tell you that on your 22nd birthday, they would like for you to get your own health insurance. You are very healthy, are not taking any prescription medicines, and generally only see your doctor for your annual physical. What type of health insurance is likely to be best for you?
a low deductible plan with a high monthly premium
your parents MUST keep you on their plan. They cannot legally remove you.
a high deductible plan with a low monthly premium
you do not need health insurance because you are healthy
insurance companies operate by charging individuals different prices for coverage depending on their risk levels. Then, they collect everyone's monthly premiums together and use the money to make payments when people file a claim (for example, someone is in an auto accident or needs to see a doctor). This concept is known as...
comprehensive coverage
underwriting
risk pooling
risk management
which of the following insurance coverage options would be the lowest priority for a typical single person, with no children 1-2 years out of high school?
like insuracne
auto insurance (if they have a car)
health insurance
renter's insurance (if they are renting an apartment)
what are the two most important factors in calculating your credit score?
amounts owed and length of credit history
payment history and types of accounts
length of credit history and new creit inquires
payment history and total debt
all of the following would show up on a credit report EXCEPT...
salary of your current job
payment history of your car loan
credit card payment histoy
student loan activity
who tracks all of your credit information?
credit reporting agencies (Equifax, Experian and TransUnion)
Federal government
consumer Financial Protection Board (CFPB)
lenders
Which of the following could have a NEGATIVE impact on your credit score if done in a short period of time>
paying your bills on-time
paying down balances on your credit card accounts
decreasing your utilization of credit
applying for multiple credit cards
what benefits do you receive by taking out a loan with a cosigner?
you automatically get the same credit score as the cosigner once the loan is paid off
you get a discount on future loans after thsi one is paid off
you have a better chance of getting approved and getting a lower interest rate if the cosigner has good credit
you get a discount on future loans after this one is paid off
Which response best completes the sentence "It's best to begin establishing credit when you're young because _____"?
accessing credit only becomes more expensive as you get older
negative marks on your credit report go away faster for younger borrowers
credit scores are free for anyone under the age of 25
you will likely need a credit history to rent your first apartment, finance your first car, or open an unsecured credit cared
The amount you can charge to a secured credit card is limited by...
the amount of money you deposit into an account as collateral
your credit score
the total amount of money across all your bank accounts
how long you've had an account with the bank
Which free credit report service is authorized by federal law but only accessible once per year?
credit karma
annualCreditReport.com
credit wise
allet hub
How can your credit score impact your financial well-being?
only consumers with high scores are approved for creditq
consumers with low scores get lower interest rates on loans than those with high scores
it generally has no impact on your financial situation
your credit score can determine whether you are approved for a loan and what the interest rate on that loan will be
