Personal Finance and Income Management Quiz

Fixed expenses are regular, predictable costs that remain constant, such as rent or mortgage payments.

APR represents the total cost of borrowing, including interest and fees, expressed as a percentage.

ROI measures the profitability of an investment, expressing the return as a percentage of the initial investment.

An emergency fund is set aside to cover unforeseen expenses or financial emergencies, providing a financial safety net.

Dollar-Cost Averaging entails consistently investing a fixed amount of money at scheduled intervals, reducing the impact of market volatility.

Roth IRAs offer tax-free withdrawals in retirement, providing a potential advantage over traditional retirement accounts.

Diversification involves spreading investments across different assets to reduce risk by avoiding overdependence on a single investment.

The debt-to-income ratio assesses an individual's financial health by comparing their debt load to their income.

Contributions to a 401(k) are made with pre-tax dollars, but they are not tax-deductible, distinguishing them from some other retirement accounts.

FICO is a credit scoring model developed by the Fair Isaac Corporation, widely used to assess individuals' creditworthiness.

The rule of 72 is a formula used to estimate the time it takes for an investment to double based on a fixed annual rate of return.

The federal funds rate is the interest rate at which banks lend to each other overnight, influencing overall interest rates in the economy.