#1
Which of the following is a characteristic of a fixed-rate loan?
Interest rate remains constant throughout the loan term
ExplanationInterest rate stays the same for the duration of the loan.
#2
What does APR stand for in finance?
Annual Percentage Rate
ExplanationAnnual interest rate plus other fees, expressed as a percentage.
#3
What is the purpose of a credit score?
To measure an individual's ability to repay debt
ExplanationAssesses an individual's creditworthiness based on past credit history.
#4
What is the primary function of the Federal Reserve System in the United States?
To regulate interest rates
ExplanationControls monetary policy, including interest rates.
#5
What is the purpose of a budget in personal finance?
To track income and expenses
ExplanationMonitor money coming in and going out to achieve financial goals.
#6
What is the concept of 'compound interest'?
Interest calculated on the initial principal and also on the accumulated interest
ExplanationInterest earned on both the initial amount invested and the interest accumulated over time.
#7
Which of the following is NOT a common type of investment account?
Checking Account
ExplanationChecking accounts are typically used for everyday transactions, not investments.
#8
What is diversification in investment?
Investing in a variety of assets to spread risk
ExplanationSpreading investments across different types of assets to reduce risk.
#9
What does the term 'liquidity' refer to in finance?
Ability to convert an asset into cash quickly without significant loss
ExplanationEase of converting assets into cash without losing value.
#10
What is the role of a stockbroker?
To buy and sell stocks on behalf of clients
ExplanationExecutes trades in stocks and other securities for clients.
#11
What is a bond?
A loan to a corporation or government
ExplanationDebt security issued by a government or corporation.
#12
What is the purpose of insurance in personal finance?
To protect against financial loss
ExplanationProvides financial protection against unexpected events or losses.
#13
What does ROI stand for in finance?
Return on Investment
ExplanationThe profit or loss generated on an investment relative to its cost.
#14
What is the difference between a traditional IRA and a Roth IRA?
Contributions to a traditional IRA are tax-deductible, while contributions to a Roth IRA are not
ExplanationTax treatment of contributions and withdrawals differs between the two retirement accounts.
#15
What is the difference between a stock and a bond?
Stock represents ownership in a company, while a bond is a loan to a company or government
ExplanationStocks convey ownership, while bonds are loans to governments or corporations.
#16
What is the purpose of asset allocation in investment?
To diversify investments across various asset classes
ExplanationSpreading investments among different types of assets to manage risk.
#17
What is the difference between a traditional savings account and a high-yield savings account?
Traditional savings accounts offer higher interest rates
ExplanationHigher interest rates offered by high-yield savings accounts compared to traditional ones.