#1
Which of the following is considered a liquid asset?
Savings Account
ExplanationEasily accessible and can be quickly converted to cash.
#2
What does APR stand for in banking?
Annual Percentage Rate
ExplanationRepresents the cost of borrowing on an annual basis, including interest and fees.
#3
What is the purpose of a budget in personal finance?
To limit spending and allocate funds effectively
ExplanationEnsures disciplined spending and prioritizes financial goals.
#4
Which of the following is a characteristic of a fixed-rate mortgage?
Interest rate remains constant throughout the loan term
ExplanationProvides predictability in monthly mortgage payments.
#5
What is the purpose of a FICO score?
To assess the risk of default on loans
ExplanationQuantifies credit risk based on credit history and financial behavior.
#6
Which of the following is a characteristic of a traditional savings account?
No risk of losing principal
ExplanationPrincipal amount is generally safe, but with lower interest rates.
#7
What is the purpose of a credit score?
To determine your eligibility for loans and credit cards
ExplanationAssesses creditworthiness and likelihood of repayment.
#8
Which type of account typically offers the highest interest rate?
Certificate of Deposit (CD)
ExplanationLocks in funds for a specific period with higher interest rates than regular savings.
#9
What is the purpose of a routing number on a check?
To identify the bank
ExplanationFacilitates electronic fund transfers by specifying the bank.
#10
What does IRA stand for in the context of retirement savings?
Individual Retirement Account
ExplanationTax-advantaged account for individual retirement savings.
#11
What is the primary function of the FDIC (Federal Deposit Insurance Corporation)?
To insure deposits in banks up to a certain amount
ExplanationProtects depositors by providing insurance on bank deposits.
#12
What is the purpose of a money market account?
To provide higher interest rates than traditional savings accounts
ExplanationOffers competitive interest rates with some liquidity.
#13
What is the purpose of diversification in investment?
To minimize risk by spreading investments across various assets
ExplanationReduces vulnerability to the poor performance of a single investment.
#14
What is the primary function of the Federal Reserve in the United States?
To control inflation and manage the money supply
ExplanationCentral bank responsible for monetary policy and economic stability.
#15
What is the significance of compound interest in investing?
It allows for exponential growth of investment over time
ExplanationInterest calculated on both the initial principal and accumulated interest.
#16
What is the primary purpose of an emergency fund?
To cover unexpected expenses and financial emergencies
ExplanationProvides a financial cushion for unforeseen expenses.
#17
What is the role of the Securities and Exchange Commission (SEC) in personal finance?
To regulate financial markets and protect investors
ExplanationOversees securities markets and promotes investor protection.