#1
2. What is the role of a credit score in consumer loans?
Determining the interest rate on the loan
ExplanationInfluencing loan interest rates.
#2
4. Which type of interest is charged on consumer loans?
Compound interest
ExplanationInterest on both principal and interest.
#3
13. What is the primary purpose of a budget in personal finance?
To limit spending
ExplanationControlling financial outflows.
#4
18. What is the purpose of a 'Grace Period' in loan agreements?
A period during which the borrower can skip making payments without consequences
ExplanationPayment postponement window.
#5
23. What is the concept of 'Risk Tolerance' in investment?
The willingness of an investor to take on risky investments
ExplanationCapacity for risk acceptance.
#6
1. What is the primary goal of financial management?
Maximizing shareholder wealth
ExplanationEnhancing value for company owners.
#7
3. What is the Debt-to-Income (DTI) ratio used for in financial management?
Assessing an individual's creditworthiness
ExplanationEvaluating ability to repay debts.
#8
6. In financial management, what does the term 'ROI' stand for?
Return on Investment
ExplanationEvaluation of investment profitability.
#9
7. What is the purpose of a 'FICO score' in the context of creditworthiness?
Determining credit risk
ExplanationAssessing borrower's creditworthiness.
#10
9. What role does a 'Collateral' play in securing a loan?
It serves as a form of loan insurance
ExplanationProviding security for lenders.
#11
5. What does the term 'Amortization' refer to in the context of loans?
Repayment of loan principal over time
ExplanationGradual repayment of loan balance.
#12
8. What is the significance of the 'Time Value of Money' in financial decision-making?
It helps in understanding the importance of timing in financial transactions
ExplanationRecognizing value changes over time.
#13
10. How does inflation impact the real return on an investment?
Inflation decreases the real return
ExplanationReducing purchasing power.
#14
15. What is the concept of 'Net Present Value' (NPV) in capital budgeting?
The current value of future cash flows discounted at a specified rate
ExplanationPresent worth of future returns.
#15
20. How does a '401(k)' contribute to personal financial planning?
It is a retirement savings plan sponsored by an employer
ExplanationEmployer-sponsored retirement fund.