#1
What is a common way to build an emergency fund?
Opening a high-yield savings account
ExplanationHigh interest yields aid in quick fund accumulation.
#2
What does APR stand for in the context of loans?
Annual Percentage Rate
ExplanationStandardized measure of loan cost.
#3
What does ROI stand for in finance?
Return on Investment
ExplanationIndicator of investment profitability.
#4
What is the primary purpose of a budget?
To limit spending
ExplanationControl expenses and track financial goals.
#5
Which of the following is considered a liquid asset?
Savings account
ExplanationEasily accessible and convertible to cash.
#6
Which of the following is NOT a type of retirement account in the United States?
TSFA
ExplanationTFSA is a Canadian retirement account.
#7
What does the term 'asset allocation' refer to in investment?
The process of diversifying investments across different asset classes
ExplanationMinimizing risk through varied investment types.
#8
Which of the following is NOT a factor affecting credit score?
Annual income
ExplanationIncome doesn't directly affect credit score.
#9
What is the purpose of dollar-cost averaging in investing?
To spread investment over time
ExplanationMinimize impact of market volatility.
#10
Which of the following is a disadvantage of using credit cards?
Potential for high interest rates
ExplanationInterest can accrue quickly on unpaid balances.
#11
What is the 'rule of 72' often used for in finance?
Calculating compound interest
ExplanationQuick approximation of investment doubling time.
#12
What is the concept of 'opportunity cost' in finance?
The cost of missed opportunities
ExplanationEvaluation of alternatives' potential gains.
#13
What is the 'efficient market hypothesis' in finance?
The idea that all information is already reflected in asset prices
ExplanationPrices reflect all available information.
#14
What is the purpose of a 529 plan?
Saving for college education
ExplanationTax-advantaged savings for educational expenses.
#15
Which of the following factors affects an individual's credit score the most?
Payment history
ExplanationTimely payment of bills significantly impacts credit score.