Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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1.
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The purpose of investing your money is to…
a. | anticipate future needs. | c. | pay for recurring
expenses. | b. | make a profit over time. | d. | save for a rainy day. |
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2.
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All of the following are common reasons for saving EXCEPT…
a. | earning interest quickly. | c. | financial
goals. | b. | emergencies. | d. | retirement. |
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3.
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The recommended size of an emergency fund is _____ times your monthly net
income.
a. | one to two. | c. | three to six. | b. | two. | d. | five to ten. |
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4.
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When you buy an expensive item on credit, you spend more than if you save for
the purchase because…
a. | buying on credit earns rewards. | b. | saving encourages impulse
buying. | c. | the money you save earns interest. | d. | you pay interest on the amount you
save. |
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5.
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When interest rates are low, consumers tend to…
a. | save less and borrow less. | c. | save more and borrow
less. | b. | save less and borrow more. | d. | save more and borrow more. |
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6.
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The best way to make a habit of saving money is to have a(n)…
a. | credit card. | c. | savings goal. | b. | discretionary fund. | d. | savings plan. |
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7.
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All of the following are steps to reach your savings goals EXCEPT…
a. | keeping your savings goals in mind. | c. | setting a specific
goal. | b. | putting your savings to work. | d. | waiting until your income
increases. |
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8.
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Discretionary income is…
a. | the amount of available income after taxes and necessary spending for food, clothing,
and shelter. | b. | the amount of available income used to build your savings. | c. | the amount of
available income with which you pay all of your bills. | d. | the amount of available income you choose to
spend on entertainment. |
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9.
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The amount you save from each paycheck should be based on your…
a. | discretionary income. | c. | savings goals and budget. | b. | payroll
deductions. | d. | self-discipline. |
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10.
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An example of paying yourself first is…
a. | asking your employer to deposit a portion of each paycheck into a savings
plan. | b. | having your entire paycheck directly deposited into a savings
account. | c. | paying for food and household needs before you spend on other
items. | d. | spending first and saving what’s left. |
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11.
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If a savings account has a stated interest rate of 3%, the monthly interest rate
is _____.
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12.
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The _____ requires financial institutions to disclose the annual percentage
yield of accounts.
a. | APY Act | c. | Truth in Lending Act | b. | Rule of 72 | d. | Truth in Savings
Act |
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13.
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The APY for an account paying 3.25% simple interest is _____.
a. | 1.625% | c. | 3.33% | b. | 3.25% | d. | 6.5% |
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14.
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The best way to determine which of two savings accounts will earn the most money
for you is to compare their _____.
a. | annual percentage yields | c. | minimum balance
requirements | b. | deposit terms | d. | simple interest rates |
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15.
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If the APY of a $1,000 savings account is 4%, and no other money is added to or
withdrawn from the account, the Rule of 72 says that the balance would reach $2,000 in about _____
years.
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