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Personal Finance Test
Terms in this set (48)
Susie values three goods in this order: 1) new headphones; 2) a computer game; and 3) a sweatshirt. Each item costs $50. Susie bought the new headphones. What is the opportunity cost?
The computer game
Which strategy is most likely to improve most people's financial situation over a lifetime?
Save up and pay for stuff in cash instead of going into debt, budget, invest
About how many years would it take for $1000 to become $2000, if $1000 is deposited in an account with an interest rate of 10%?
about 7 years
What is the difference between gross pay and net pay?
Gross pay is your paycheck before taxes/deductions are taken out and Net pay is your take-home pay; what your paycheck is after taxes/deductions are taken out
An employee works for 50 hours per week at $10 per hour. The deductions per week are $50 in federal income taxes, $20 in state income taxes, and $30 in Social Security taxes. What is the net pay for the week?
If you invest $1,000 at 15% interest, how much money will be in the account after two years, compounded annually?
What is true about investing in single stocks?
There is a high degree of risk
A collection of money from different investors, which is used to purchase stocks, bonds, or other investments, and is managed by a fund manager is called:
What is the best option if you begin losing money in your mutual fund?
leave your money alone
The risk return ration says:
As the risk goes up, so should the return
Your piece of ownership in a company is called:
A bond is
debt instrument where a company owes you money and pays small amount of interest
The company Jason works for matches his 401(k) contribution up to 5%. Jason takes advantage of this by maximizing his contribution amount to $100 per month. At the end of one year, how much money will be in his account?
If you have $3000 invested in a Roth IRA, what is true about your contribution
You have already paid taxes on the money so it will grow tax free
Using the rule of 72, how long will it take your money to double at 6% interest
Charlie opens a savings account and deposits $500. If the savings account has a fixed annual interest rate of 5%, and he makes no additional deposits or withdrawals, what amount will Charlie have in his savings account at the end of two years?
Beginning to save while you are young is recommended by financial experts because it
lets compound interest work in your favor by earning interest on interest
About how many years would it take for $1000 to become $2000, if $1000 is deposited in an account with an interest rate of 7.2%?
Which of the following should you save for:
All of the above
all of the above
Liquidity: List 3 types of investments and list them in order from most liquid to least liquid
What is the general relationship between risk and reward/rate of return (Interest)?
The higher the risk, the higher the potentional award
If you invest in something that gets 1%, how many years will it take for your money to double?
What is it known as when you pay off your smallest debt first, then take that money to pay on your next debt, and you keep doing this until you are debt free?
A sinking fund approach means:
a way to purchase items; saving up a little money each month then pay with case
If you are investing in a mutual fund that averages 12%, how long will it take you for your money to double?
When you invest a certain amount of money each month towards an investment, this is known as what?
Why is it important to have an emergency fund
So when emergencies happen, you do not need to resort to payday loans, or cash-advance and title loans
When is the only time you should choose tax deferred
if it is a small amount
Disposable income is money that is
the money that you have leftover to spend/save after all your expenses have been paid(important to doing a budget)
Using the sinking fund approach, how much do you have to save each month to buy a $5000 car one year from now?
$416.67 a month
What is a good financial tip for high school and college students
Have an emergency fund and save $500 monthly
You are investing your money in a savings account getting 3% interest. How long will it take your money to double?
What is it known as when you take investment money out of gross pay and pay taxes at retirement?
What is it known as when you take investment money out of net pay and do not pay taxes at retirement?
What is a mutual fund?
Investors who pool their money; pool of 30-300 stocks; managed by a fund manager
What is an example of a tax free shelter
life insurance for a specified period of time (best option); CHEAPER than cash-value policies
also known as universal or whole-life insurance; builds an investment with life insurance; you do not get both options (it's either one or the other)
portion of the medical bill (or any insurance) you pay BEFORE insurance kicks in
interest rate on mortgage is FIXED
balance of your mortgage payment excluding interest paid
loans where you only pay the interest; your last payment is the entire amount you borrowed; not a good idea!
loan payments on a house
who gets hurt the most with higher energy costs
Who was responsible for Dave Ramsey going bankrupt
What does debt rob you of
you can do everything you can do with a debit card except what
go into debt
more young adults file for bankruptcy than
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