Personal Finance Basics Quiz

Explore essential financial concepts with 14 questions. Assess your grasp on budgeting, investing, and more. Challenge yourself now!

Practice Learn Test

Which of the following is considered a liquid asset?

Real estate

Stocks

Personal car

Furniture

What is a credit score?

A numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of an individual.

A fixed amount of money charged by lenders for borrowing money.

A financial statement that reports a company's financial performance over a specific accounting period.

The total amount of money being transferred into and out of a business.

Which of the following best defines 'inflation'?

The decrease in the purchasing power of a currency.

The increase in the value of stocks over time.

The decrease in the value of a currency compared to foreign currencies.

The general increase in prices and fall in the purchasing value of money.

What is an emergency fund?

Money saved for large purchases

Money invested in the stock market

Money set aside for unexpected expenses

Money saved for retirement

What is a '401(k)' plan?

A tax-deferred retirement savings plan offered by an employer

A government-sponsored retirement savings plan

A personal savings plan with high interest rates

An insurance plan covering workplace injuries

What is the 50/30/20 budget rule?

50% needs, 30% wants, 20% savings

50% savings, 30% needs, 20% wants

50% wants, 30% savings, 20% needs

50% investments, 30% wants, 20% savings

Which of the following accounts typically offers the highest interest rate?

Checking account

Savings account

Certificate of Deposit (CD)

Money market account

What is the primary benefit of diversification in investment?

Guaranteed returns

Lower taxes

Risk reduction

Higher interest rates

What is the difference between a Roth IRA and a Traditional IRA?

Roth IRA contributions are tax-deductible, while Traditional IRA contributions are not.

Roth IRA allows for tax-free withdrawals in retirement, whereas Traditional IRA withdrawals are taxed.

Traditional IRA has higher contribution limits than Roth IRA.

Roth IRA is employer-sponsored, while Traditional IRA is not.

#10

Which of the following is not a characteristic of a bond?

Fixed interest payments

Equity ownership in a company

Principal repayment at maturity

Can be issued by governments and corporations

#11

What does the term 'compounding' refer to in the context of investing?

The process of increasing investment risk over time

The consolidation of multiple investments into a single fund

The increase in value of an investment due to earned interest or dividends being reinvested to generate additional earnings

The act of investing in compound interest-bearing accounts only

#12

What does it mean to 'short' a stock?

To sell a stock you own in anticipation of buying it back at a lower price.

To invest in a stock for the short term.

To borrow shares of a stock and sell them, hoping to buy them back at a lower price for a profit.

To buy a stock with the intention of selling it at a slightly higher price.

#13

What is the primary advantage of a High-Deductible Health Plan (HDHP) with a Health Savings Account (HSA)?

It offers unlimited medical visits

It allows for pre-tax savings to be used for qualified medical expenses

It covers all medical expenses without a deductible

It provides comprehensive coverage for international travel

#14

What does it mean when a bond is called?

The bond has defaulted, and the issuer cannot make payments.

The bond is being sold to another investor.

The issuer repays the bond before its maturity date, usually at a premium.

The bond's interest rate is adjusted according to market rates.