#1
What does APR stand for in personal finance?
Annual Percentage Rate
ExplanationRate reflecting the yearly cost of borrowing, including interest and fees.
#2
What is the term used for a loan that is backed by collateral?
Mortgage
ExplanationLoan secured by real estate property.
#3
What does '401(k)' refer to in the context of personal finance?
A retirement savings plan sponsored by employers
ExplanationEmployer-sponsored retirement plan allowing employees to save and invest a portion of their paycheck.
#4
What is the purpose of a 'budget' in personal finance?
To track income and expenses
ExplanationPlan outlining expected income and expenses to manage finances.
#5
What does 'IRA' stand for in finance?
Individual Retirement Account
ExplanationTax-advantaged retirement account for individuals.
#6
What is the meaning of the term 'dividend' in finance?
A portion of a company's profits distributed to shareholders
ExplanationShare of profits paid out to shareholders as a reward.
#7
What does 'ETF' stand for in finance?
Exchange-Traded Fund
ExplanationInvestment fund traded on stock exchanges, holding assets such as stocks or bonds.
#8
What is the term for the process of spreading investments among different assets to reduce risk?
Diversification
ExplanationStrategy to minimize risk by investing in various assets.
#9
What is the term for the process of borrowing money to invest and potentially increase returns?
Leveraging
ExplanationUsing borrowed funds to amplify potential returns.
#10
What does 'FICO' represent in personal finance?
Fair Isaac Corporation
ExplanationCompany providing credit scoring models, often used to determine creditworthiness.
#11
What is the purpose of 'asset allocation' in personal finance?
To manage risk by investing in different asset classes
ExplanationStrategy to distribute investments across various asset types.
#12
What does 'ROE' stand for in finance?
Return on Equity
ExplanationMeasure of a company's profitability relative to shareholder equity.