#1
What is the meaning of APR in personal finance?
Annual Percentage Rate
ExplanationThe cost of borrowing, expressed as a percentage, including interest and fees.
#2
Which of the following is a type of retirement account commonly used in the United States?
All of the above
ExplanationOptions like 401(k), IRA, and Roth IRA are commonly used retirement accounts in the U.S.
#3
What does the term 'compound interest' refer to in personal finance?
Interest calculated on the initial principal and also on the accumulated interest
ExplanationInterest earned on both the initial investment and previous interest.
#4
What is the purpose of an emergency fund in personal finance?
To cover unexpected expenses
ExplanationA fund set aside to handle unforeseen expenses or financial emergencies.
#5
What does the term 'capital gains' refer to in personal finance?
Profit from the sale of an investment or asset
ExplanationThe positive difference between the sale price of an asset and its original purchase price.
#6
What does ROI stand for in personal finance?
Return on Investment
ExplanationA measure of the profitability of an investment.
#7
What is the 'Rule of 72' used for in personal finance?
Estimating time to double an investment
ExplanationA quick formula to estimate how long it takes for an investment to double based on a fixed annual rate of return.
#8
What is the concept of 'asset allocation' in personal finance?
Diversifying investments among different asset classes
ExplanationSpreading investments across different types of assets to manage risk.
#9
Which of the following is a characteristic of a Roth IRA?
Tax-free withdrawals in retirement
ExplanationEarnings can be withdrawn tax-free in retirement.
#10
What does the term 'FICO score' represent in personal finance?
Credit score calculated by Fair Isaac Corporation
ExplanationA numerical representation of an individual's creditworthiness.
#11
What is the primary function of a budget in personal finance?
To allocate income
ExplanationA tool to plan and allocate income to various expenses and savings goals.
#12
What does the term 'liquidity' mean in personal finance?
Ability to convert assets into cash quickly without significant loss of value
ExplanationThe ease with which assets can be turned into cash without a substantial loss in value.
#13
What does 'asset under management (AUM)' mean in personal finance?
Total value of assets managed by a financial institution
ExplanationThe combined value of all the assets that a financial institution manages on behalf of its clients.
#14
What does the term '401(k) match' mean in personal finance?
Employer's contribution to an employee's retirement account
ExplanationEmployer matching funds added to an employee's 401(k) retirement savings.
#15
What does the term 'tax deduction' mean in personal finance?
Reduction in taxable income
ExplanationAn expense that can be subtracted from an individual's gross income to reduce the amount subject to taxation.