#1
Which of the following is an example of an essential expense?
Rent or mortgage payment
ExplanationBasic necessity crucial for housing stability.
#2
What is the purpose of a credit score?
To assess your creditworthiness
ExplanationEvaluation tool determining reliability for loans.
#3
What does APR stand for in relation to loans?
Annual Percentage Rate
ExplanationIndicator of loan interest rate annually.
#4
Which of the following is a characteristic of a secured loan?
Requires collateral
ExplanationBacked by assets for lender security.
#5
What is the 'rule of 72' used for in finance?
To estimate investment growth
ExplanationQuick approximation of investment doubling.
#6
What is the formula for calculating compound interest?
P = C / (1 + r/n)^(nt)
ExplanationEquation for interest on principal amount.
#7
What is the primary purpose of a budget?
To track expenses and income
ExplanationManagement tool for financial monitoring.
#8
What is the purpose of a 'grace period' on a credit card?
To provide a period without interest charges
ExplanationTimeframe for interest-free payments.
#9
What is the difference between a traditional IRA and a Roth IRA?
Tax treatment of withdrawals
ExplanationContrasting taxation on retirement withdrawals.
#10
Which of the following is a characteristic of a 401(k) retirement account?
Employer-sponsored retirement plan
ExplanationWorkplace-sponsored retirement arrangement.
#11
Which of the following is NOT a type of investment?
Credit card debt
ExplanationA liability involving borrowed funds.
#12
What is the purpose of diversification in investment portfolios?
To reduce risk
ExplanationRisk mitigation strategy through variety.
#13
What is a stock split?
A company's stock is divided into shares
ExplanationDivision of shares, increasing quantity.
#14
What is the difference between a traditional 401(k) and a Roth 401(k)?
Tax treatment of contributions and withdrawals
ExplanationDiffering tax implications on inputs and outputs.
#15
What is the purpose of dollar-cost averaging?
To invest a fixed amount at regular intervals
ExplanationStrategy for consistent investment regardless of market fluctuations.