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CH. 1 Finance Review
Test Description: Test prep
Instructions: Answer all questions to get your test result.
1) TThe first thing you should save for is your retirement fund.
A
True
B
False
2) Pre-authorized checking helps to build discipline in saving.
A
False
B
True
3) Your first “Baby Step” is to pay off all of your debt.
A
False
B
True
4) You should invest 10% of your household income into Roth IRAs and pre-tax retirement plans.
A
False
B
True
5) Murphy’s Law is more likely to strike if you are prepared for the unexpected events that occur throughout life.
A
False
B
True
6) Savings is about:
A
contentment and emotion
B
pride and greed
C
contentment and earning more money
D
making more money and discipline
7) For with of the following should you save
A
emergency fund
B
all of the above
C
wealth building
D
purchases
8) Which of the following is true about the concept of saving?
A
you must pay yourself first
B
your will save when you make more money
C
saving must become a priority
D
all of the above
9) A sinking fund approach means
A
saving and paying casy
B
buying with credit, getting a low interest rate, and sinking further into debt
C
90 days same-as-cash
D
buying with credit but paying it off in full before the interest comes due
10) Which statement is most true about a one- time investment for 40 years?
A
The interest rate doesn’t matter as long as you leave it alone for 40 years.
B
It is foolish to only make a one-time investment.
C
The annual interest rate does matter when making a one time investment.
D
all of the above
11) If you invest $1,000 at 12% interest, how much money will be in the account after two years, compounded annually?
A
$1,254.40
B
$1,240
C
$1,120
D
$1,300
12) How much money should you have in your emergency fund if you are working on Baby Step 2 (pay off all debt)?
A
you should not have an emergency fund until all debt is paid
B
3-6 months of expenses
C
15% of your household income
D
$500 or $1,000, depending on your current income
13) Using the sinking fund approach, how much do you have to save to buy a $5,000 car next year?
A
$300 a month into savings
B
$275 a month into savings
C
$400 a month into savings
D
$416.66 a month into savings
14) What is the next step after you have a fully funded emergency fund?
A
Pay off the rest of your mortgage
B
Work on both a and b at the same time
C
Finish paying off the last credit card
D
Invest 15% of your income into Roth IRAs and pre-tax retirement plans
15) Which statement is true?
A
People spend more money when they pay with cash.
B
When you pay with cash, you can almost always negotiate a better deal.
C
Using a credit card is safer than carrying cash around.
D
When you pay with cash, it is hard to negotiate a deal because you didn’t use their credit.
16) Which is the correct order of priorities for your money?
A
Pay bills, save, give
B
It is not important which order you follow as long as you do these three things
C
Save, pay bills, give
D
Give, save, pay bills
17) How much money should Lisa and Joe have in their emergency fund if they have a $3,000 credit card bill and a mortgage?
A
No emergency fund until the credit card is paid off
B
3-6 months of expenses
C
10% of their credit card balance
D
$1,000
18) Which of the following would be the most sensible way to buy a $4,000 car?
A
Use the sinking fund approach and save $400 a month for ten months.
B
Ask your parents to co-sign a loan at your local credit union.
C
Put a down payment of $500 and use 90 days same-as-cash to pay the balance.
D
Shop around for the best interest rate before taking out a $4,000 loan.
19) Which of these is not a key to saving money?
A
Making savings a habit and a priority
B
Your income
C
Focus
D
Disciplince
20) Even though a savings account is fine when you are just beginning to save, why is a money market a better place to keep your emergency fund?
A
A savings account is a bit too easy to access.
B
Typically, money markets average a higher interest rate than a savings account.
C
A money market is accessible and generally has check writing privileges if needed.
D
All of the above
*select an answer for all questions
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