#1
Which of the following is a basic principle of personal finance?
Spend more than you earn
Save and invest regularly
Ignore budgeting
Avoid insurance
#2
What is the purpose of a credit score in personal finance?
To measure income
To assess spending habits
To evaluate creditworthiness
To determine tax liability
#3
What is the concept of 'inflation' in personal finance?
A decrease in the money supply
An increase in the purchasing power of money
A general rise in the prices of goods and services
A reduction in interest rates
#4
What is the purpose of diversification in investment portfolios?
To concentrate all investments in one asset
To spread risk across different assets
To avoid taxation on investments
To maximize short-term returns
#5
What is the primary purpose of a certificate of deposit (CD) in personal finance?
To invest in the stock market
To provide life insurance
To earn a fixed interest over a specific term
To pay off credit card debt
#6
What does the term 'compound interest' refer to in personal finance?
Interest paid only once
Interest calculated on the initial principal and also on the accumulated interest
Interest waived off
Interest paid monthly
#7
What is the purpose of an emergency fund in personal finance?
To fund luxury purchases
To cover unexpected expenses
To invest in the stock market
To pay off long-term debt
#8
In personal finance, what does the term 'debt-to-income ratio' represent?
The amount of savings compared to income
The proportion of debt relative to income
The amount of credit available
The ratio of investments to income
#9
What is the primary purpose of a 401(k) retirement account?
Emergency savings
Home down payment
College education fund
Long-term retirement savings
#10
What does the term 'liquid assets' refer to in personal finance?
Assets that are difficult to sell
Assets that can be easily converted to cash
Long-term investments
Real estate properties
#11
What is the purpose of a Roth IRA in retirement planning?
To provide health insurance in retirement
To offer tax-free withdrawals in retirement
To fund education expenses
To accumulate wealth for heirs
#12
What is the 50/30/20 rule in budgeting?
50% spending, 30% saving, 20% investing
50% spending, 30% investing, 20% saving
50% saving, 30% spending, 20% investing
50% investing, 30% saving, 20% spending
#13
What is the concept of 'opportunity cost' in personal finance?
The cost of missed opportunities
The cost of high-risk investments
The cost of living in an expensive city
The cost of luxury items
#14
What is the concept of 'tax deduction' in personal finance?
Money deducted from savings
A reduction in taxable income
Interest on loans
A decrease in expenses
#15
What is the significance of a will in personal finance planning?
To distribute assets after death
To calculate net worth
To pay off debts
To secure a mortgage
#16
What is the role of a financial advisor in personal finance?
To manage daily expenses
To provide investment advice
To handle tax preparation
To offer legal services
#17
How does the 'snowball method' work in debt repayment?
Paying off the smallest debts first
Paying off the highest interest debts first
Ignoring debt payments for a certain period
Consolidating all debts into one