PERSONAL FINANCE FINAL EXAM
QUESTIONS WITH CORRECT ANSWERS
GRADED A+
Baby iSteps i- iCORRECT iANSWER-7 isteps ito ia ihealthy ifinancial iplan
Compound iInterest i- iCORRECT iANSWER-Interest ipaid ion iinterest ipreviously iearned; icredited idaily,
imonthly, iquarterly, isemi-annually ior iannually ion iboth iprincipal iand ipreviously icredited iinterest
Emergency iFund i- iCORRECT iANSWER-3-6 imonths iof iexpenses iin ireadily iavailable icash ito ibe
iused ionly iin ian iemergency
Interest iRate i- iCORRECT iANSWER-The ipercent ipaid ito ia ilender ifor ithe iuse iof iborrowed imoney
Money iMarket i- iCORRECT iANSWER-A imutual ifund ithat iseeks ito imaintain ia istable ishare iprice
iand ito iearn icurrent iincome iby iinvesting iin iinterest-bearing iinstruments iwith ishort-term i(usually
i90 idays ior iless) imaturities
Sinking iFund i- iCORRECT iANSWER-Saving imoney ifor ipurchases iand iletting iinterest iwork ifor, inot
iagainst iyou
Diversification i- iCORRECT iANSWER-To ispread iaround ione's iinvestment idollars iamong iseveral
idifferent iclasses iof ifinancial iassets iamong ithe isecurities iand imany iissuers iresults iin ilower irisks
Liquidity i- iCORRECT iANSWER-Quality iof ian iasset ithat ipermits iit ito ibe iconverted iquickly iinto
icash; iavailability iof imoney
Risk i- iCORRECT iANSWER-Degree iof iuncertainty iof ian iasset; iin ibusiness, ithe ilikelihood iof iloss ior
ireduced iprofit
, Risk iReturn iRatio i- iCORRECT iANSWER-Relationship iof isubstantial ireward iin icomparison ito ithe
iamount iof irisk itaken
Share i- iCORRECT iANSWER-A ipiece iof iownership iin iacompany ior imutual ifund
Annual iFee i- iCORRECT iANSWER-A ifee icharged iby ia icredit icard icompany ifor ithe iuse iof itheir
icredit icard
Annual iPercentage iRate i(APR) i- iCORRECT iANSWER-The icost iof iborrowing imoney ion ian iannual
ibasis. iTakes iinto iaccount ithe iinterest irate iand iother irelated ifees ion ia iloan
Credit i- iCORRECT iANSWER-Money iowned
Debt iSnowball i- iCORRECT iANSWER-The ipreferred imethod iof idebt irepayment. iIncludes ia ilist iof
iall idebts iorganized ifrom ismallest ito ilargest ibalance. iMinimum ipayments iare imade ito iall idebts
iexcept ifor ithe ismallest, iwhich iis iattacked iwith ithe ilargest ipossible ipayments
Depreciation i- iCORRECT iANSWER-A idecline iin ithe ivalue iof iproperty. iThe iopposite iof iappreciation
Tax iDeduction i- iCORRECT iANSWER-An iexpense ithat ia itaxpayer iis iallowed ito ideduct ifrom itaxable
iincome. iFor iexample, imoney ipaid ias ihome imortgage iinterest iand icharitable idonations ican ibe
ideducted ifrom iyour itotal iincome ibefore icalculating ihow imuch iincome itax iyou imust ipay ithe
igovernment
Buyer's iRemorse i- iCORRECT iANSWER-Regretting ia ipurchase isoon iafter imaking iit
Financing i- iCORRECT iANSWER-To ibuy ion itime iwith icredit; ipaying ifor iit iover itime
Finite i- iCORRECT iANSWER-Having ia ibeginning iand ian iend
Opportunity iCost i- iCORRECT iANSWER-The itrue icost iof isomething iin iterms iof iwhat iyou ihave ito
igive iup ito iget ithe iitem. iThe ibenefits iyou iwould ihave ireceived iby itaking ithe iother iaction.
QUESTIONS WITH CORRECT ANSWERS
GRADED A+
Baby iSteps i- iCORRECT iANSWER-7 isteps ito ia ihealthy ifinancial iplan
Compound iInterest i- iCORRECT iANSWER-Interest ipaid ion iinterest ipreviously iearned; icredited idaily,
imonthly, iquarterly, isemi-annually ior iannually ion iboth iprincipal iand ipreviously icredited iinterest
Emergency iFund i- iCORRECT iANSWER-3-6 imonths iof iexpenses iin ireadily iavailable icash ito ibe
iused ionly iin ian iemergency
Interest iRate i- iCORRECT iANSWER-The ipercent ipaid ito ia ilender ifor ithe iuse iof iborrowed imoney
Money iMarket i- iCORRECT iANSWER-A imutual ifund ithat iseeks ito imaintain ia istable ishare iprice
iand ito iearn icurrent iincome iby iinvesting iin iinterest-bearing iinstruments iwith ishort-term i(usually
i90 idays ior iless) imaturities
Sinking iFund i- iCORRECT iANSWER-Saving imoney ifor ipurchases iand iletting iinterest iwork ifor, inot
iagainst iyou
Diversification i- iCORRECT iANSWER-To ispread iaround ione's iinvestment idollars iamong iseveral
idifferent iclasses iof ifinancial iassets iamong ithe isecurities iand imany iissuers iresults iin ilower irisks
Liquidity i- iCORRECT iANSWER-Quality iof ian iasset ithat ipermits iit ito ibe iconverted iquickly iinto
icash; iavailability iof imoney
Risk i- iCORRECT iANSWER-Degree iof iuncertainty iof ian iasset; iin ibusiness, ithe ilikelihood iof iloss ior
ireduced iprofit
, Risk iReturn iRatio i- iCORRECT iANSWER-Relationship iof isubstantial ireward iin icomparison ito ithe
iamount iof irisk itaken
Share i- iCORRECT iANSWER-A ipiece iof iownership iin iacompany ior imutual ifund
Annual iFee i- iCORRECT iANSWER-A ifee icharged iby ia icredit icard icompany ifor ithe iuse iof itheir
icredit icard
Annual iPercentage iRate i(APR) i- iCORRECT iANSWER-The icost iof iborrowing imoney ion ian iannual
ibasis. iTakes iinto iaccount ithe iinterest irate iand iother irelated ifees ion ia iloan
Credit i- iCORRECT iANSWER-Money iowned
Debt iSnowball i- iCORRECT iANSWER-The ipreferred imethod iof idebt irepayment. iIncludes ia ilist iof
iall idebts iorganized ifrom ismallest ito ilargest ibalance. iMinimum ipayments iare imade ito iall idebts
iexcept ifor ithe ismallest, iwhich iis iattacked iwith ithe ilargest ipossible ipayments
Depreciation i- iCORRECT iANSWER-A idecline iin ithe ivalue iof iproperty. iThe iopposite iof iappreciation
Tax iDeduction i- iCORRECT iANSWER-An iexpense ithat ia itaxpayer iis iallowed ito ideduct ifrom itaxable
iincome. iFor iexample, imoney ipaid ias ihome imortgage iinterest iand icharitable idonations ican ibe
ideducted ifrom iyour itotal iincome ibefore icalculating ihow imuch iincome itax iyou imust ipay ithe
igovernment
Buyer's iRemorse i- iCORRECT iANSWER-Regretting ia ipurchase isoon iafter imaking iit
Financing i- iCORRECT iANSWER-To ibuy ion itime iwith icredit; ipaying ifor iit iover itime
Finite i- iCORRECT iANSWER-Having ia ibeginning iand ian iend
Opportunity iCost i- iCORRECT iANSWER-The itrue icost iof isomething iin iterms iof iwhat iyou ihave ito
igive iup ito iget ithe iitem. iThe ibenefits iyou iwould ihave ireceived iby itaking ithe iother iaction.
