Personal Finance Chapter 2

1.

1 point

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

True

False

2.

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

3.

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

emergency fund

sinking fund

4.

1 point

Saving is about:

Budgeting money and discipline

Contentment and earning more money

Contentment and emotion

Pride and Greed

5.

1 point

Saving money over time for a large purchase.

sinking fund

interest

installment loan

6.

1 point

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

savings account

emergency fund

credit card

7.

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?

$161.96

$1441.96

$5441.96

8.

1 point

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

True

False

9.

1 point

The five steps to financial success

five foundations

five money truths

five money myths

10.

1 point

Americans typically maintain a very high savings rate.

True

False

11.

1 point

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

interest rate

principal

dividend

12.

1 point

For which of the following should you save

purchases

wealth building

emergency fund

all of the above

13.

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 $150,000

Over $500,000

14.

1 point

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

Rate of return matters.

The length of time money is invested matters.

The amount of the initial investment is the key.

15.

1 point

At your age, a fully funded emergency fund should be

$1000

$5000

$500

$100

16.

1 point

Save a $500 emergency fund

Second Foundation

Third Foundation

First Foundation

17.

1 point

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

Use your debit card

Use your ATM

Use direct deposit

18.

1 point

Your income level greatly affects your saving habits.

True

False

19.

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

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

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

Large purchases

Have money available to lend to friends

emergency fund

build wealth

22.

1 point

Interest paid on interest previously earned

compound interest

interest

simple interest

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 simple interest?

$5280

$3200

$1280

24.

1 point

Which of the following steps is the First Foundation?

Get out of debt

Build wealth and give

Save a $500 emergency fund

25.

1 point

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

True

False