WorksheetsPersonal Finance - Final Exam (50 Points)
Total questions: 25
Worksheet time: 13mins
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 your returns without charging a fee
Compound interest allows you to earn interest not only on the amount you have saved, but also on 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 investing decisions?
Staying calm when the market is experiencing a downturn
Buying stocks when prices are low and selling them when they're high
Exiting the market because that’s what everyone else is doing
Investing in a diversified portfolio instead of trying to beat the market
The upside to having a high deductible is:
Lower insurance premium.
Higher insurance premium.
You are less likely to get in an accident.
You will have more insurance coverage.
If you buy a $1000 bicycle, which credit card payoff strategy will result in your paying the LEAST total amount?
Pay the minimum monthly payment
Pay $100 per month for 10 months
Pay $250 per month until it’s paid off
Don’t make any payments until you have the full $1000 saved, regardless of how long that takes
Ralph has a shiny new car, and he wants to make sure the insurance company will help him fix or replace it in case of any type of damage. Each of these coverage areas will provide the type of coverage he’s looking for on his car EXCEPT…
Uninsured/underinsured motorist
Collision
Comprehensive
Liability
When do you receive your FAFSA Submission Summary?
1-2 weeks after submission
1-3 business days after submission
1 month after submission
Immediately after submission.
Which of the statements below BEST describes the relationship between risk and return when considering an investment?
Investors expect to earn a lower return when they invest in a high risk asset
Investors expect to earn a higher return when they invest in a low risk asset
Investors expect to earn a higher return when they invest in a high risk asset
Investors expect to earn zero return when investing in a low risk asset
Why is diversification a recommended investment strategy?
Investing in a diversified portfolio guarantees that you won’t lose money with your investments
If you tell your fund manager to use diversification, they’ll charge you lower fees
Diversifying your portfolio helps reduce risk
If you diversify your portfolio, you will definitely earn a high return
Which of the following is a characteristic of dollar-cost averaging?
Dollar-cost averaging is a way to decrease your risk
Dollar-cost averaging is a strategy that only expert investors use
Dollar-cost averaging is advantageous because earnings are untaxed
Dollar-cost averaging is offered exclusively through robo-advisors
Why is it best to file the FAFSA as early as possible?
So you don't have to file again the following year.
Financial aid is given out on a first come, first served basis.
So that you have better chance to get accepted to school of your choice.
There are school, state, and federal deadlines to file the FAFSA
An actively managed 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 to diversify your portfolio
How can someone make money from investing in a stock?
They sell the stock for a lower price than what they bought it for
They receive dividends or they sell the stock at a higher 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
An example of a fixed expense when budgeting is:
Cell phone bill
Grocery bill
Emergency room bill
Clothing expenses
What do you receive after submitting the FAFSA?
College acceptance letters
Loans from commercial lenders
Merit based scholarships
Submission Summary which includes your Student Aid Index (SAI)
Which statement best describes a Schumer box?
The final calculation of how much you owe on your credit card bill each month
A standardized way of presenting the key terms of your credit card agreement
A legal document stating that you’re behind on your credit card payments
The outstanding balance on your credit card once you’ve made your recent payment
A disadvantage of using a robo-adviser might be that…
You are charged higher fees than if a human fund manager adjusted your portfolio
You may not be able to get advice from a human financial advisor when you want it
You don’t have any input as to how your portfolio is invested
You’ll be put on a waitlist to use the robo-adviser since there are only a handful of them to choose from
Antonio has 4000savedtouseforadownpayment,andhe’sabouttobuyacarthatcosts 29,000. How much would you expect his loan principal to be?
$4000
$25,000
$33,000
$29,000 x his interest rate
Shonda’s mom recommends that she spend a year building her credit history and boosting her credit score before she applies for a loan to buy her dream car, which costs $54,000. Why is that good advice?
A good credit score will reduce her down payment
A good credit score will reduce her principal
A good credit score will reduce her interest rate
A good credit score will allow her to pay the full $54,000 in cash
What information do you need to have ready to request your credit report?
Name, Last Employer, Current Income, Social Security #
Name, Social Security #, Education Level, Phone #
Name, Date of Birth, Social Security #, Address
None of the above
What are the three credit reporting agencies you would possibly need to contact to report an error on your credit report?
FICO, Internal Revenue Service, FAFSA
TransUnion, Experian, Equifax
Equifax, Transportation Department, Experian
None of the above
All of the following appear on your credit report EXCEPT…
Your checking account balance
Student loan payment history
Balance owed on an auto loan
Number of active credit accounts
In general, why do so many different types of companies check your credit report?
They’re legally required to do so by the Securities and Exchange Commission (SEC)
To determine the price of the product or service they’re selling you
Doing business with someone with a low credit score will also lower their credit score
They want to make sure you’re likely to make consistent and timely payments
What is the scale for minimum to maximum possible credit score?
100-1000
250-900
300-850
0-850
Imagine your only available credit is a credit card with a limit of 5,000.Ifyouhaveabalanceof 1000, what is your credit utilization percentage?
10%
37.5%
50%
20%
