Personal Finance Chapter 2

1.

1 point

Saving money over time for a large purchase.

allowance

interest

sinking fund

installment loan

2.

1 point

Money today has different buying power than the same amount of money in the future

interest

credit

loan

time value of money

3.

1 point

What does it mean to have a negative savings rate?

Saving for something that is a want instead of a need

Having no savings at all

Having a fully funded emergency fund

Spending more money than you make and acquiring debt

4.

1 point

Americans typically maintain a very high savings rate.

True

False

5.

1 point

Because of compounding interest, if you saved $100 per week starting at age 16 until age 70, you would have saved

Over $100,000

Over $500,000

Over $150,000

Over $200,000

6.

1 point

The main reason that people save is to

Purchase groceries

Invest for short-term goals

Pay monthly bills on time

Pay off their mortgage early

7.

1 point

Percentage paid to a lender for the use of borrowed money, or the percentage earned on invested principal

interest rate

savings rate

principal

dividend

8.

1 point

When youʹre older and out of school, youʹll need to grow your emergency fund into a full three to six monthsʹ worth of expenses.

True

False

9.

1 point

Saving is an important part of a personal budget plan to achieve short-and long-term goals. Financial experts recommend that the minimum amount saved from each paycheck should be

25%

20%

10%

5%

10.

1 point

Why is having a fully funded emergency fund so important when it comes to your financial well-being?

As long as you have a good-paying job, you really donʹt need an emergency fund

The purpose of an emergency fund is to set money aside for unexpected financial emergencies and to provide a sense of financial security.

The purpose of an emergency fund is to have money set aside for large purchases, like vacations.

none of the above

11.

1 point

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.

True

False

12.

1 point

The five steps to financial success

five money myths

the Jackson Five

five foundations

five money truths

13.

1 point

At your age, a fully funded emergency fund should be

$1000

$500

$5000

$100

14.

1 point

Credit Unions are owned by

their members.

the Chief Executive Officer.

the Board of Directors.

corporate counsel.

15.

1 point

For which of the following should you save

purchases

wealth building

emergency fund

all of the above

16.

1 point

Which of the following is NOT one of the three basic reasons for saving money?

Have money available to lend to friends

build wealth

emergency fund

Large purchases

17.

1 point

Your money is insured by the National Credit Union Administration in a credit union up to

$200,000

$250,000

$100,000

$300,000

18.

1 point

The saving habits of Ben and Arthur best illustrate which principle of saving?

How much is added each year is the key.

The amount of the initial investment is the key.

The length of time money is invested matters.

Rate of return matters.

19.

1 point

The most effective method to transfer your paycheck to your savings account is to

Use your debit card

Use your ATM

Drive to your bank or credit union

Use direct deposit

20.

1 point

Which of the following is a reason that people donʹt save money?

they lack discipline

they do not live on a budget

they lack focus

all of the above

21.

1 point

You should save money for three basic reasons: emergency fund, purchases and wealth building.

True

False

22.

1 point

Money set aside and left alone for a ʺrainy day.ʺ

savings account

emergency fund

allowance

credit card

23.

1 point

4000 dollars is deposited into a bank account and the annual interest rate is 8%. How much is the interest after 4 years using compound interest?

$9441.96

$5441.96

$161.96

$1441.96

24.

1 point

When youʹre in high school, you wonʹt have the same emergency expenses as your parents.

True

False

25.

1 point

All of the items listed below are functions of the Federal Reserve System EXCEPT which one.

Supervise and regulate banking.

Keep the country's financial systems stable.

Provide financial services to the US government and the financial institutions.

Manage the stock market.

26.

1 point

The first thing you should save for is your retirement fund.

True

False

27.

1 point

Why should interest earned NOT be a factor with your emergency fund?

Inflation can eat up the interest earned.

Interest-bearing accounts at banks earn a high rate of interest, therefore, interest is not a concern.

The emergency fund is not intended to grow wealth.

None of the above

28.

1 point

Which of the following is NOT a reason your emergency fund should be kept in a separate savings account away from your spending money?

So that you do not get your spending and saving money confused.

So that it is not too easy to access.

So that it is clear what money is only to be used for emergencies

So that your emergency fund savings can earn a lot of interest.

29.

1 point

Using the sinking fund approach, how much do you have to save each month to buy a $4,800 car one year from now?

$275

$500

$400

$300

30.

1 point

Which of these is not a key to saving money?

making saving a habit and a priority

your income

discipline

focus

31.

1 point

You should keep your emergency fund in the same account as your spending money.

True

False

32.

1 point

Instead of borrowing money for large purchases, you should set money aside in a ______over time and pay with cash

credit card fraud

sinking fund

mortgage fund

emergency fund

33.

1 point

Your money is insured by the Federal Deposit Insurance Corporation in a bank up to

$250,000

$100,000

$200,000

$300,000

34.

1 point

4000 dollars is deposited into a bank account and the annual interest rate is 8%. How much is the interest after 4 years using simple interest?

$1280

$3200

$5280

$12,800

35.

1 point

Your income level greatly affects your saving habits.

True

False

36.

1 point

Save a $500 emergency fund

First Foundation

Second Foundation

Third Foundation

37.

1 point

An interest-bearing account is an account that generates interest income on the available balance in the account.

True

False

38.

1 point

Saving is about:

Contentment and emotion

Budgeting money and discipline

Contentment and earning more money

Pride and Greed

39.

1 point

Interest paid on interest previously earned

compound interest

interest

not interested

simple interest

40.

1 point

Which of the following steps is the First Foundation?

Build wealth and give

Get out of debt

Save a $500 emergency fund

Pay cash for your car