Money Matters Final Exam
- 1.
The first thing you should save for is your retirement fund.
- A.
True
- B.
False
Correct Answer
B. False -
- 2.
Pre-authorized checking helps to build discipline in saving.
- A.
False
- B.
True
Correct Answer
B. True -
- 3.
Your first “Baby Step” is to pay off all of your debt.
- A.
True
- B.
False
Correct Answer
B. False -
- 4.
You should invest 10% of your household income into Roth IRAs and pre-tax retirement plans.
- A.
True
- B.
False
Correct Answer
B. False -
- 5.
Murphy’s Law is more likely to strike if you are prepared for the unexpected events that occur throughout life.
- A.
True
- B.
False
Correct Answer
B. False -
- 6.
Savings is about:
- A.
Making more money and discipline
- B.
Pride and greed
- C.
Contentment and emotion
- D.
Contentment and earning more money
Correct Answer
C. Contentment and emotion -
- 7.
For which of the following should you save?
- A.
Wealth building
- B.
Emergency fund
- C.
Purchases
- D.
All of the above
Correct Answer
D. All of the above -
- 8.
Which of the following is true about the concept of saving?
- A.
Saving must become a priority.
- B.
You will save when you make more money.
- C.
You must pay yourself first.
- D.
All of the above
Correct Answer
A. Saving must become a priority. -
- 9.
A sinking fund approach means:
- A.
Saving and paying cash
- 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
Correct Answer
A. Saving and paying cash -
- 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
Correct Answer
C. The annual interest rate does matter when making a one time investment. -
- 11.
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.
Correct Answer
C. When you pay with cash, you can almost always negotiate a better deal. -
- 12.
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
Correct Answer
C. Invest 15% of your income into Roth IRAs and pre-tax retirement plans -
- 13.
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
Correct Answer
D. $416.66 a month into savings -
- 14.
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
Correct Answer
D. $500 or $1,000, depending on your current income -
- 15.
True or false: Diversification means to spread around.
- A.
True
- B.
False
Correct Answer
A. True -
- 16.
True or false: With all investments, as the risk goes up, the return goes down.
- A.
True
- B.
False
Correct Answer
B. False -
- 17.
100% of the ten-year periods in the history of the stock market have made money.
- A.
True
- B.
False
Correct Answer
A. True -
- 18.
The difference between saving and investing is the amount of interest you earn on your money.
- A.
True
- B.
False
Correct Answer
B. False -
- 19.
A share is a piece of ownership in an annuity.
- A.
True
- B.
False
Correct Answer
B. False -
- 20.
Which is not true about investments?
- A.
Never invest using borrowed money.
- B.
Diversification will help lower the risk.
- C.
Always invest only for tax savings purposes.
- D.
Never invest only for tax savings purposes.
Correct Answer
C. Always invest only for tax savings purposes. -
- 21.
What is true about investing in single stocks?
- A.
There is a low degree of risk.
- B.
There is a high degree of risk.
- C.
The risk is the same whether you invest in mutual funds or stocks. in mutual funds or stocks.
- D.
If the stock is from your employer, the risk is lower.
Correct Answer
B. There is a high degree of risk. -
- 22.
A collection of money from different investors, which is used to purchase stocks, bonds, or other investments,and is managed by a fund manager is called:
- A.
Company Stock
- B.
Annuities
- C.
Mutual Funds
- D.
Bonds
Correct Answer
C. Mutual Funds -
- 23.
Which is a type of annuity?
- A.
Variable
- B.
Stable
- C.
Fixed
- D.
Both a and c
Correct Answer
D. Both a and c -
- 24.
The most aggressive mutual funds tend to be from:
- A.
Companies that are a little younger and growing
- B.
Companies that are overseas
- C.
Companies that are older and well-established
- D.
All of the above
Correct Answer
A. Companies that are a little younger and growing -
- 25.
What is the best option if you begin losing money in your mutual fund?
- A.
Call your broker and switch your funds.
- B.
Pull everything out and open a certificate of deposit at the bank.
- C.
Leave it alone, but stop investing money in the fund.
- D.
Leave it alone and continue to invest money in the fund.
Correct Answer
D. Leave it alone and continue to invest money in the fund. -
- 26.
Which of the following is a risk to consider when investing?
- A.
You could lose all of your money
- B.
Inflation
- C.
Your money is not liquid
- D.
All of the above
Correct Answer
D. All of the above -
- 27.
True or false: Pre-tax means the government allows you to invest money after taxes are taken out.
- A.
True
- B.
False
Correct Answer
B. False -
- 28.
True or false: ESAs are a good way to save for college.
- A.
True
- B.
False
Correct Answer
A. True -
- 29.
Once you have a fully funded emergency fund, put 10% of your income into retirement plans.
- A.
True
- B.
False
Correct Answer
B. False -
- 30.
457 plans are designed for employees of non-profit organizations such as hospitals and schools.
- A.
True
- B.
False
Correct Answer
B. False -
- 31.
If we used a race analogy to describe building wealth, it would be most like a marathon.
- A.
True
- B.
False
Correct Answer
A. True -
- 32.
The company Jason works for matches his 401(k) contribution up to 5%. Jason takes advantage of this by maximizing his contribution amount to $200 per month. At the end of one year, how much money will be in his account?
- A.
$1,200
- B.
$2,400
- C.
$4,800
- D.
$5,000
Correct Answer
C. $4,800 -
- 33.
What definition best explains an IRA?
- A.
A type of investment at a bank
- B.
A type of investment at a bank or investment firm that has good tax benefits
- C.
The tax treatment on virtually any type of investment
- D.
Investment that uses pre-tax dollars
Correct Answer
C. The tax treatment on virtually any type of investment -
- 34.
The primary difference between the Roth IRA and a traditional IRA is:
- A.
The IRA allows a contribution amount of $5,000 for non-income producing spouses; the Roth IRA doesn’t.
- B.
The Roth IRA grows tax free; the traditional IRA doesn’t.
- C.
Contributions to your Roth are pre-tax; contributions to a traditional IRA are after-tax.
- D.
A traditional IRA grows tax free; the Roth IRA doesn’t.
Correct Answer
B. The Roth IRA grows tax free; the traditional IRA doesn’t. -
- 35.
Under which condition are you not able to make a tax-free withdrawal from your Roth IRA?
- A.
Over 59 and a one half years old
- B.
First-time home purchase up to $10,000
- C.
Career change and temporary drop of income
- D.
Death or disability
Correct Answer
C. Career change and temporary drop of income -
- 36.
What is the best option for your retirement plan when you leave a company?
- A.
Have the money sent to you and deposit it into a new IRA within 60 days.
- B.
Do a direct transfer into an IRA.
- C.
Leave the plan where it is so it can continue to accrue interest.
- D.
Cash out the plan and invest in good mutual funds.
Correct Answer
B. Do a direct transfer into an IRA. -
- 37.
If you have $3,000 invested in a Roth IRA, what is true about your contribution?
- A.
You have already paid taxes on the money, so it will grow tax free.
- B.
You will pay taxes only on the growthof $3,000.
- C.
You have maxed out your contribution.
- D.
Both a and b
Correct Answer
A. You have already paid taxes on the money, so it will grow tax free. -
- 38.
Which of the following is a good way to save for college?
- A.
ESA
- B.
Life insurance
- C.
Pre-paid college tuition
- D.
Savings bonds
Correct Answer
A. ESA -
- 39.
When seeking a financial counselor to help you with your investments, always go with:
- A.
A close family member or friend because you will be helping each other out
- B.
A financial counselor who is sophisticated and uses all of the right vocabulary
- C.
A financial counselor with the heart of a teacher who explains everything to you
- D.
A financial counselor who has at least five years experience
Correct Answer
C. A financial counselor with the heart of a teacher who explains everything to you -
- 40.
What does Baby Step 5 say about saving for your children’s college?
- A.
Use tax-favored plans
- B.
Use pre-paid college tuition
- C.
Use a Certificate of Deposit
- D.
Use insurance or savings bonds
Correct Answer
A. Use tax-favored plans -
Quiz Review Timeline +
Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.
-
Current Version
-
Jun 04, 2015Quiz Edited by
ProProfs Editorial Team -
Jan 07, 2014Quiz Created by
Back to top