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Personal Finance Unit 4 Review - Budgeting & Saving

Total questions: 45

Worksheet time: 23mins

Name
Class
Date
1.
How much should Samantha be saving each month (minimum)?
a)
$300
b)
$28.00
c)
$280.00
d)
She can't afford to save.
2.
What is Samantha's Wealth?
a)
$2800
b)
$3700
c)
$16,200
d)
$2530
3.
What is Samantha's net worth?
a)
$3700
b)
$16,200
c)
-$12,500
d)
$270
4.
What kind of budget balance does Samantha have?
a)
A surplus
b)
A deficit
c)
A balanced budget
d)
Not enough information provided to answer
5.
Why are mutual funds a popular form of saving for many people?
a)
They offer a guaranteed return on your investment.
b)
They are the safest of all the investments.
c)
They ensure that your money is invested in a variety of stocks and bonds.
d)
They are high risk, but carry the potential of a high return.
6.
Which of the following is the best description of a municipal bond?
a)
This investment is safe, because you are lending money to the U.S. government.
b)
This investment is FDIC insured for up to $150,000.
c)
This investment represents ownership in a corporation.
d)
This tax-exempt investment is issued by state and local governments to raise funds.
7.
Which of the following lists assets from MOST risky to LEAST risky?
a)
Certificates of Deposit, Treasury Bonds, Junk Bonds, Traditional IRA's
b)
Treasury Bonds, Municipal Bonds, Roth IRA's, Mutual Funds
c)
Junk Bonds, Mutual Funds, Certificates of Deposit, Treasury Bonds
d)
Municipal Bonds, Junk Bonds, Treasury Bonds, Certificates of Deposit
8.
What is the main difference between a traditional and a Roth IRA?
a)
With a Roth IRA, funds are deposited tax-free, but you must pay income tax when you withdraw the funds in the future. With a traditional IRA taxes are paid before funds are deposited, and are accessed tax-free when you're older.
b)
With a traditional IRA, funds are deposited tax-free, but you must pay income tax when you withdraw the funds in the future. With a Roth, taxes are paid before funds are deposited, and are accessed tax-free when you're older.
c)
Roth IRA's are only appropriate for younger investors, and traditional IRA's are better for older people.
d)
Traditional IRA's have significant tax benefits, but Roth IRA's do not.
9.
When choosing an investment, what is the relationship between risk and return?
a)
High risk investments have a low return and low risk investments will tend to provide a higher rate of return.
b)
Safer investments are riskier because you loose the opportunity to make more money.
c)
High risk investments come with the potential for a high return and low risk investments will yield a lower return.
d)
High return investments are considered low risk.
10.
Who tracks your credit information and determines your credit score?
a)
Equifax, Experian, and Transunion
b)
Your bank
c)
The Consumer Protection Bureau
d)
Creditors and Lenders
11.
True or False? If you choose a loan with a shorter term length, your monthly payment will be higher, but you will pay less in total interest.
a)
True
b)
False
12.
Which of the following statements about credit cards is true?
a)
You make the same payment each month.
b)
You must have money deposited into your checking account to use the credit card for any purchases.
c)
The only way to avoid paying interest charges is to pay the entire balance every month.
d)
Credit cards do not charge interest.
13.
What items are included in your credit report?
a)
your bank account balances
b)
how long your bank accounts have been open
c)
your credit payment history
d)
the exact items you've purchased on your credit card
14.
How does the Federal Reserve use monetary policy to prevent or slow down rising inflation?
a)
The Fed will decrease the Federal Funds Rate
b)
The Fed will increase taxes
c)
The Fed will decrease taxes
d)
The Fed will increase the Federal Funds Rate
15.

When the Federal Reserve INCREASES interest rates to slow down the economy, it is called

a)

Easy Money Policy

b)

Tight Money Policy

16.
How does the Federal Reserve use monetary policy to stimulate the economy and reduce unemployment?
a)
The Fed will decrease taxes
b)
The Fed will decrease the Federal Funds Rate
c)
The Fed will increase taxes
d)
The Fed will increase the Federal Funds Rate
17.

When the Federal Reserve DECREASES interest rates to slow down the economy, it is called

a)

Easy Money Policy

b)

Tight Money Policy

18.
Why is the monthly payment on a leased car usually cheaper than than the monthly payment on a car purchased with a loan?
a)
because when you lease a car you will own it at the end of the term
b)
because you do not need to pay for insurance on a leased car
c)
because when you lease you are only paying for the depreciation on the vehicle, plus interest
d)
because when you lease a car you are only paying for the interest on the loan
19.
Which of the following is a benefit of owning a home vs. renting?
a)
Maintenance and repair costs will be lower
b)
You build equity over time
c)
You can afford to live in more expensive areas
d)
You have more flexibility if you decide to move to a new house
20.

If Suzanne invests 5000 and earns 2% compound APR, how long will it take for her investment to DOUBLE?

a)

100 years

b)

36 years

c)

69 years

d)

7.2 years

21.

What does the term "equity" mean when discussing financial assets?

a)

Equality

b)

Liquidity

c)

Low Risk

d)

Ownership

22.

What is the difference between common stock and preferred stock?

a)

Common stock is safe but preferred stock is considered riskier.

b)

Preferred stock allows shareholders a vote. Common stock provides a guaranteed dividend but no vote on the board of directors.

c)

Preferred stock gives a guaranteed dividend but no vote on the board of directors. Common stock allows shareholders a vote but does NOT guarantee a dividend.

d)

Common stock is less expensive than preferred stock

23.

If you owned 50 shares of DOL stock, how much dividend would you receive at the end of the year?

a)

$40

b)

$200

c)

$20

d)

$0.40

24.

What was the year's highest price per share for DowChem Stock?

a)

$136.88

b)

$74.69

c)

$138.00

d)

$132.38

25.

Which stock had the least volume traded on this day?

a)

Disney

b)

DonnelyA

c)

DK

d)

DonnaKm

26.

Denise earns a monthly salary of $5,000 and her monthly expenditures total $5150. Which of the following is a true statement?

a)

Denise's wealth totals $5,000

b)

Denise has a budget surplus of $150

c)

Denise has a budget deficit of $150

d)

Financial planners would suggest that she save a minimum of $250 per month

27.

Sara has saved $1,000 into an account that pays interest on the interest she has already earned. Every year, her earned interest is added to her principal balance. What kind of an account does Sara have?

a)

a simple interest account

b)

a complex interest account

c)

a compounding interest account

28.

Which asset below is the MOST risky?

a)

Common Stock

b)

Treasury Bonds

c)

Corporate Bonds

d)

Junk Bond

29.

Which asset below is the LEAST risky?

a)

Common Stock

b)

Treasury Bonds

c)

Corporate Bonds

d)

Junk Bond

30.

What is the SEC?

a)

The Securities Exchange Commission

b)

The government agency that oversees the sale of stocks.

c)

The government agency that oversees the companies who sell stocks.

d)

All of these are true descriptions of the SEC

31.

Hannah owns shares of stock in many companies. It can be said that

a)

Hannah is rich.

b)

Hannah has a good eye for money.

c)

Hannah has a DIVERSIFIED portfolio.

d)

Hannah can't make up her mind about how to invest her money.

32.

When shopping for credit, it is best to look for an account with the lowest APR possible.

a)

True

b)

False

33.

Why is it a good idea to increase your credit score?

a)

You are more likely to get a job.

b)

You will win friends and influence people.

c)

It will be easier to qualify for a loan, and you will enjoy lower interest rates on borrowed money.

d)

No one really cares about credit scores, and no one will ever check your credit.

34.

Why are CD's (certificates of deposit) considered a safe way to save?

a)

Savers do not have to pay taxes on their earnings.

b)

Dividend payments are guaranteed.

c)

Investments are professionally managed.

d)

They are generally FDIC insured.

35.

Which of the following is the best description of a mutual fund?

a)

A high risk investment with a low rate of return.

b)

A pooled investment that is professionally managed.

c)

An equity asset that provides guaranteed dividends to shareholders.

d)

A tax-exempt bond issued by cities to fund local improvements.

36.

In the study of Economics, what is meant by the term "opportunity cost?"

a)

It refers to the opportunities gained when good financial decisions are made

b)

It refers to the best possible choice a person can make

c)

It refers to the next best option that is given up when a choice is made

d)

It refers to the worst choice a person can make

37.

What is opportunity cost of putting off saving until you are much older?

a)

You will have more money when you are ready to retire

b)

You will have less money when you are older (and may not be able to retire comfortably)

c)

You will have the opportunity to have more fun with your money when you are older

d)

You will be able to buy lots of nice things throughout your lifetime

38.

True or false: Stocks are generally considered more risky than corporate bonds.

a)

True

b)

False

39.

Jackson is young and just starting to save. He is putting some money in a retirement account, and a portion of his savings into a standard bank savings account. Why is this a good strategy for Jackson?

a)

A savings account is more liquid, in case Jackson needs to access his money

b)

Jackson is considering his long-term retirement goals, but also setting aside money for short-term needs

c)

Even though bank savings account isn't the way to build long-term wealth, it's the best way to save for an emergency fund

d)

All of the above

40.

What are the main factors everyone should consider when choosing an asset?

a)

Risk

b)

Return

c)

Liquidity

d)

All of the above

41.

When discussing assets, what does the term "liquidity" mean?

a)

how easily can the asset be converted to cash

b)

how likely is the asset to earn money

c)

how likely are you to lose your investment

d)

what is the asset's tax rate

42.

Why should you avoid making only the minimum payment on your credit cards?

a)

Your credit score will go up

b)

You will not be able to open an investment account

c)

You may be turned down for a job

d)

You will have to pay more in interest and it will take you longer to pay off the bill

43.

What is the FOMC?

a)

It is the Federal Open Market Committee

b)

It is the agency within the Federal Reserve that makes most monetary policy decisions

c)

It the part of the Federal Reserve that makes decisions about raising or lowering interest rates

d)

All of the above

44.

Select the two ways that a person can earn money by investing in stocks

a)

Sell a stock for a higher price than the purchase price

b)

Lock in a high interest rate on the stock

c)

Choose a stock that also pays dividends

d)

Consistently purchase at the 52-week high price

45.

Why should you avoid spending more money than you have in your checking account (even if you have overdraft protection)?

a)

The bank will charge you an overdraft fee

b)

The bank will immediately close your account

c)

The bank will report you to the three credit bureaus

d)

You will be banned from opening any new accounts for 30 days

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