#1
Which of the following is an example of a liquid asset?
Savings Account
ExplanationAssets easily convertible to cash without significant loss.
#2
What does APR stand for in the context of loans and credit cards?
Annual Percentage Rate
ExplanationThe annualized interest rate charged on borrowed money.
#3
What does the term 'liquidity' refer to in personal finance?
The ability to access cash quickly without loss of value
ExplanationHow easily assets can be converted into cash without loss.
#4
What is the purpose of an emergency fund?
To cover unexpected expenses or loss of income
ExplanationFinancial safety net for unforeseen events or financial hardships.
#5
What is the term for the process of converting cash into assets that can earn a return?
Investing
ExplanationAllocating funds into assets to generate returns over time.
#6
Which of the following is considered a liability in personal finance?
Credit Card Debt
ExplanationObligation to repay borrowed money, typically with interest.
#7
What is the primary function of a budget in personal finance?
To track income and expenses
ExplanationMonitoring and controlling financial inflows and outflows.
#8
What does the term 'asset allocation' refer to in investing?
The distribution of investment funds among different asset classes
ExplanationBalancing investment portfolio among various asset types.
#9
What is the purpose of diversification in an investment portfolio?
To minimize risk by spreading investments across different assets
ExplanationReducing risk by investing in various assets with uncorrelated returns.
#10
Which of the following is NOT a factor typically considered in credit scoring?
Education level
ExplanationWhile important, education level doesn't directly impact credit scoring.
#11
What is the purpose of compounding interest in investment?
To increase the value of an investment over time
ExplanationEarning interest on both the initial investment and the accumulated interest.
#12
What is the term for the price of one currency in terms of another currency?
Exchange Rate
ExplanationRate at which one currency can be exchanged for another.
#13
What is the 'Rule of 72' used for in personal finance?
To estimate how long it takes to double an investment
ExplanationQuickly estimating the time for investments to double at a given interest rate.
#14
What is the key difference between a traditional IRA and a Roth IRA?
Tax treatment of contributions
ExplanationTaxation of contributions and withdrawals differ between the two IRAs.
#15
What does the term 'asset depreciation' refer to?
Loss of value over time
ExplanationReduction in the value of assets over time due to wear and tear, obsolescence, etc.
#16
What is the term for the difference between an asset's purchase price and its selling price?
Capital Gain
ExplanationProfit earned from the sale of an investment or asset.
#17
What is the primary purpose of a will in personal finance?
To specify how assets should be distributed after death
ExplanationLegal document outlining distribution of assets upon death.