Money Matters Final Exam

1. For which of the following should you save?

Wealth building

Emergency fund

Purchases

All of the above

2. True or false: Diversification means to spread around.

True

False

3. Which statement is true?

People spend more money when they pay with cash.

Using a credit card is safer than carrying cash around.

When you pay with cash, you can almost always negotiate a better deal.

When you pay with cash, it is hard to negotiate a deal because you didn’t use their credit.

4. How much money should you have in your emergency fund if you are working on Baby Step 2 (pay off all debt)?

15% of your household income

3-6 months of expenses

You should not have an emergency fund until all debt is paid

$500 or $1,000, depending on yourcurrent income

5. 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:

Company Stock

Annuities

Mutual Funds

Bonds

6. True or false: ESAs are a good way to save for college.

True

False

7. If we used a race analogy to describe building wealth, it would be most like a marathon.

True

False

8. A sinking fund approach means:

Saving and paying cash

Buying with credit but paying it off in full before the interest comes due

Buying with credit, getting a low interest rate, and sinking further into debt

90 days same-as-cash

9. Pre-authorized checking helps to build discipline in saving.

False

True

10. What is true about investing in single stocks?

There is a low degree of risk.

There is a high degree of risk.

The risk is the same whether you invest in mutual funds or stocks.in mutual funds or stocks.

If the stock is from your employer, therisk is lower.

11. The first thing you should save for is your retirement fund.

True

False

12. Which of the following is a risk to consider when investing?

You could lose all of your money

Inflation

Your money is not liquid

All of the above

13. When seeking a financial counselor to help you with your investments, always go with:

A close family member or friend because you will be helping each other out

A financial counselor who is sophisticated and uses all of the right vocabulary

A financial counselor with the heart of a teacher who explains everything to you

A financial counselor who has at least five years experience

14. Your first "Baby Step" is to pay off all of your debt.

True

False

15. Using the sinking fund approach, how much do you have to save to buy a $5,000 car next year?

$275 a month into savings

$300 a month into savings

$400 a month into savings

$416.66 a month into savings

16. Which is a type of annuity?

Variable

Stable

Fixed

Both a and c

17. Which statement is most true about a one-time investment for 40 years?

The interest rate doesn’t matter as long as you leave it alone for 40 years.

It is foolish to only make a one-time investment.

The annual interest rate does matter when making a one time investment.

All of the above

18. True or false: With all investments, as the risk goes up, the return goes down.

True

False

19. 100% of the ten-year periods in the history of the stock market have made money.

True

False

20. True or false: Pre-tax means the government allows you to invest money after taxes are taken out.

True

False

21. If you have $3,000 invested in a Roth IRA, what is true about your contribution?

You have already paid taxes on the money, so it will grow tax free.

You will pay taxes only on the growthof $3,000.

You have maxed out your contribution.

Both a and b

22. Murphy's Law is more likely to strike if you are prepared for the unexpected events that occur throughout life.

True

False

23. Which is not true about investments?

Never invest using borrowed money.

Diversification will help lower the risk.

Always invest only for taxsavings purposes.

Never invest only for taxsavings purposes.

24. You should invest 10% of your household income into Roth IRAs and pre-tax retirement plans.

True

False

25. Under which condition are you not able to make a tax-free withdrawal from your Roth IRA?

Over 59 and a one half years old

First-time home purchase up to $10,000

Career change and temporary drop of income

Death or disability

26. Which of the following is a good way to save for college?

ESA

Life insurance

Pre-paid college tuition

Savings bonds

27. Savings is about:

Making more money and discipline

Pride and greed

Contentment and emotion

Contentment and earning more money

28. The most aggressive mutual funds tend to be from:

Companies that are a little youngerand growing

Companies that are overseas

Companies that are older andwell-established

All of the above

29. 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?

$1,200

$2,400

$4,800

$5,000

30. Which of the following is true about the concept of saving?

Saving must become a priority.

You will save when you make more money.

You must pay yourself first.

All of the above

31. What is the next step after you have a fully funded emergency fund?

Pay off the rest of your mortgage

Finish paying off the last credit card

Invest 15% of your income into Roth IRAs and pre-tax retirement plans

Work on both a and b at the same time

32. 457 plans are designed for employees of non-profit organizations such as hospitals and schools.

True

False

33. Once you have a fully funded emergency fund, put 10% of your income into retirement plans.

True

False

34. A share is a piece of ownership in an annuity.

True

False

35. What is the best option for your retirement plan when you leave a company?

Have the money sent to you and deposit it into a new IRA within 60 days.

Do a direct transfer into an IRA.

Leave the plan where it is so it can continue to accrue interest.

Cash out the plan and invest in good mutual funds.

36. What is the best option if you begin losing money in your mutual fund?

Call your broker and switch your funds.

Pull everything out and open a certificateof deposit at the bank.

Leave it alone, but stop investing moneyin the fund.

Leave it alone and continue to investmoney in the fund.

37. What definition best explains an IRA?

A type of investment at a bank

A type of investment at a bank or investment firm that has good tax benefits

The tax treatment on virtually any type of investment

Investment that uses pre-tax dollars

38. The primary difference between the Roth IRA and a traditional IRA is:

The IRA allows a contribution amount of $5,000 for non-income producing spouses; the Roth IRA doesn’t.

The Roth IRA grows tax free; the traditional IRA doesn’t.

Contributions to your Roth are pre-tax; contributions to a traditional IRA are after-tax.

A traditional IRA grows tax free; the Roth IRA doesn’t.

39. What does Baby Step 5 say about saving for your children's college?

Use tax-favored plans

Use pre-paid college tuition

Use a Certificate of Deposit

Use insurance or savings bonds

40. The difference between saving and investing is the amount of interest you earn on your money.

True

False

Money Matters Final Exam

1. For which of the following should you save?

2.

What first name or nickname would you like us to use?

2. True or false: Diversification means to spread around.

3. Which statement is true?

4. How much money should you have in your emergency fund if you are working on Baby Step 2 (pay off all debt)?

5. 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:

6. True or false: ESAs are a good way to save for college.

7. If we used a race analogy to describe building wealth, it would be most like a marathon.

8. A sinking fund approach means:

9. Pre-authorized checking helps to build discipline in saving.

10. What is true about investing in single stocks?

11. The first thing you should save for is your retirement fund.

12. Which of the following is a risk to consider when investing?

13. When seeking a financial counselor to help you with your investments, always go with:

14. Your first "Baby Step" is to pay off all of your debt.

15. Using the sinking fund approach, how much do you have to save to buy a $5,000 car next year?

16. Which is a type of annuity?

17. Which statement is most true about a one-time investment for 40 years?

18. True or false: With all investments, as the risk goes up, the return goes down.

19. 100% of the ten-year periods in the history of the stock market have made money.

20. True or false: Pre-tax means the government allows you to invest money after taxes are taken out.

21. If you have $3,000 invested in a Roth IRA, what is true about your contribution?

22. Murphy's Law is more likely to strike if you are prepared for the unexpected events that occur throughout life.

23. Which is not true about investments?

24. You should invest 10% of your household income into Roth IRAs and pre-tax retirement plans.

25. Under which condition are you not able to make a tax-free withdrawal from your Roth IRA?

26. Which of the following is a good way to save for college?

27. Savings is about:

28. The most aggressive mutual funds tend to be from:

29. 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?

30. Which of the following is true about the concept of saving?

31. What is the next step after you have a fully funded emergency fund?

32. 457 plans are designed for employees of non-profit organizations such as hospitals and schools.

33. Once you have a fully funded emergency fund, put 10% of your income into retirement plans.

34. A share is a piece of ownership in an annuity.

35. What is the best option for your retirement plan when you leave a company?

36. What is the best option if you begin losing money in your mutual fund?

37. What definition best explains an IRA?

38. The primary difference between the Roth IRA and a traditional IRA is:

39. What does Baby Step 5 say about saving for your children's college?

40. The difference between saving and investing is the amount of interest you earn on your money.