CH. 1 Finance Review: Question Preview (ID: 32184)

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Which of the following would be the most sensible way to buy a $4,000 car?
a) Put a down payment of $500 and use 90 days same-as-cash to pay the balance.
b) Use the sinking fund approach and save $400 a month for ten months.
c) Shop around for the best interest rate before taking out a $4,000 loan.
d) Ask your parents to co-sign a loan at your local credit union.

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) 3-6 months of expenses
b) 10% of their credit card balance
c) $1,000
d) No emergency fund until the credit card is paid off

Which is the correct order of priorities for your money?
a) Give, save, pay bills
b) Pay bills, save, give
c) Save, pay bills, give
d) It is not important which order you follow as long as you do these three things

Which statement is true?
a) People spend more money when they pay with cash.
b) Using a credit card is safer than carrying cash around.
c) When you pay with cash, you can almost always negotiate a better deal.
d) When you pay with cash, it is hard to negotiate a deal because you didn’t use their credit.

What is the next step after you have a fully funded emergency fund?
a) Pay off the rest of your mortgage
b) Finish paying off the last credit card
c) Invest 15% of your income into Roth IRAs and pre-tax retirement plans
d) Work on both a and b at the same time

Using the sinking fund approach, how much do you have to save to buy a $5,000 car next year?
a) $275 a month into savings
b) $300 a month into savings
c) $400 a month into savings
d) $416.66 a month into savings

How much money should you have in your emergency fund if you are working on Baby Step 2 (pay off all debt)?
a) 15% of your household income
b) 3-6 months of expenses
c) you should not have an emergency fund until all debt is paid
d) $500 or $1,000, depending on your current income

If you invest $1,000 at 12% interest, how much money will be in the account after two years, compounded annually?
a) $1,120
b) $1,240
c) $1,254.40
d) $1,300

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

A sinking fund approach means
a) saving and paying casy
b) buying with credit but paying it off in full before the interest comes due
c) buying with credit, getting a low interest rate, and sinking further into debt
d) 90 days same-as-cash

Which of the following is true about the concept of saving?
a) saving must become a priority
b) your will save when you make more money
c) you must pay yourself first
d) all of the above

Savings is about:
a) making more money and discipline
b) pride and greed
c) contentment and emotion
d) contentment and earning more money

For with of the following should you save
a) wealth building
b) emergency fund
c) purchases
d) all of the above

Murphy’s Law is more likely to strike if you are prepared for the unexpected events that occur throughout life.
a) True
b) False

TThe first thing you should save for is your retirement fund.
a) True
b) False

Pre-authorized checking helps to build discipline in saving.
a) True
b) False

Your first “Baby Step” is to pay off all of your debt.
a) True
b) False

You should invest 10% of your household income into Roth IRAs and pre-tax retirement plans.
a) True
b) False

Which of these is not a key to saving money?
a) Your income
b) Making savings a habit and a priority
c) Disciplince
d) Focus

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

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