#1
What is the purpose of a budget?
To allocate income and control spending
ExplanationBudgets help manage income and spending.
#2
Which of the following is an example of a variable expense?
Groceries
ExplanationGroceries are subject to change, hence variable.
#3
What does APR stand for in the context of loans and credit cards?
Annual Percentage Rate
ExplanationAPR signifies yearly interest rate.
#4
What is the purpose of an emergency fund?
To cover unexpected expenses or loss of income
ExplanationEmergency funds provide financial safety net.
#5
What does the term 'liquidity' refer to in finance?
The ability to convert an asset into cash quickly without significant loss of value
ExplanationLiquidity denotes asset's convertibility to cash without loss.
#6
What is the purpose of diversification in investment?
To spread investment across different assets to reduce risk
ExplanationDiversification minimizes investment risk through asset variety.
#7
What is the formula to calculate compound interest?
Principal * (1 + Rate)^Time
ExplanationFormula for calculating compound interest.
#8
Which of the following is NOT a component of the Debt-to-Income Ratio (DTI)?
Credit score
ExplanationCredit score is not a component of DTI.
#9
Which of the following is a characteristic of a fixed-rate mortgage?
Interest rate remains constant throughout the loan term
ExplanationInterest rate in fixed-rate mortgages doesn't change.
#10
Which of the following is NOT a factor that affects credit score?
Age and gender
ExplanationCredit score isn't influenced by age or gender.
#11
What is the purpose of a 401(k) retirement account?
To save for retirement with tax advantages
Explanation401(k) accounts aid retirement savings with tax benefits.
#12
Which of the following is NOT a type of investment account?
Roth (Retirement Only Taxable at Home)
ExplanationRoth isn't a classification of investment account.
#13
What is the formula to calculate Return on Investment (ROI)?
(Net Profit / Initial Investment) * 100%
ExplanationROI formula measures profitability of an investment.
#14
What is the formula to calculate the present value of an investment?
Future Value / (1 + Rate)^Time
ExplanationFormula to find present worth of an investment.