2013 Personal Finance Final: Savings Vehicles

12 Questions | Total Attempts: 30

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Personal Finance Quizzes & Trivia

This quiz is designed to assess your applied understanding of savings vehicles.


Questions and Answers
  • 1. 
    The average stock market return spanning the 86 years from 1926-2012 has approximated 9%.  According tp the Rule of 72, how often will an individual's investment double in that time?
    • A. 

      Approximately every 9.5 years

    • B. 

      Every 8 years

    • C. 

      1.2 years

    • D. 

      Every 72 years

  • 2. 
    Jacob has $5,000 that he has saved from doing odd jobs around the neighborhood.  When he graduates from college in four years, he would like to have $10,000 to use as a down payment on a new car. If Jacob is going to realize his dream, what interest rate will he have to invest his money at?
    • A. 

      18%

    • B. 

      50%

    • C. 

      .06%

    • D. 

      None of the above

  • 3. 
    A deferred compensation plan, such as a 401(k) _____
    • A. 

      Is an arrangement between an employer and employee under which a portion of employee's pay is withheld and paid out a future date with earnings.

    • B. 

      Allows an employee to make pre-tax contributions to an account that may be matched, in part, by the employer.

    • C. 

      Pushes the tax liability to a future date when the money is withdrawn.

    • D. 

      All of the above

  • 4. 
    This type of savings vehicle requires a minimum amount to open, has a short term, and restricts the number of withdrawals you can make. 
    • A. 

      Passbook Savings

    • B. 

      IRA

    • C. 

      MMA

    • D. 

      CD

  • 5. 
    Which of the following is most liquid?
    • A. 

      Certificate of deposit

    • B. 

      Money market account

    • C. 

      Savings account

    • D. 

      All the above

  • 6. 
    The strategy that maximizes your return with CD laddering involves the following:
    • A. 

      Spreading money across several CDs that have different term or maturity dates

    • B. 

      Placing all your money in the shortest-term CDs and when it matures, laddering up to longer-term ones.

    • C. 

      Shopping the market for the best rates or highest rung rate across various financial institutions.

    • D. 

      None of these strategies.

  • 7. 
    What is the relationship between the interest rate and liquidity of savings vehicles/
    • A. 

      The interest rate is a product of liquidity.

    • B. 

      Higher interest rates are offered in exchange for lower liquidity.

    • C. 

      There is no correlation between these factors.

    • D. 

      Higher interest rates are offered in exchange for higher liquidity.

  • 8. 
    The strategy that maximizes your return with CD laddering involves the following:
    • A. 

      Spreading money across several CDs that have different maturity dates.

    • B. 

      Placing all your money in the shortest-term CD and when it matures, laddering up to longer-term ones.

    • C. 

      Shopping the market for the best rates or highest rung rate across various financial institutions.

    • D. 

      None of these strategies

  • 9. 
    Contributions to a deferred compensation plan, e.g., 401(k) plan, are made with after-tax dollars.
    • A. 

      True

    • B. 

      False

  • 10. 
    What is the most significant distinction between a traditional IRA and a Roth IRA?
    • A. 

      Both allow the investor to set aside pre-tax dollars.

    • B. 

      Retirement-age withdrawals are taxed on a traditional IRA, but not on a Roth.

    • C. 

      A Roth requires the investor to have earned income, but a traditional IRA does not.

    • D. 

      There is no difference, other than the Roth name was added in honor of the deceased Senator who authored the legislation to create this account.

  • 11. 
    EE and I Bonds offer the following benefits:
    • A. 

      Interest is exempt from local, state and federal taxes if used for qualifying educational expenses

    • B. 

      Earn interest for up to 30 years

    • C. 

      May be redeemed at any time after the initial 12-month holding period

    • D. 

      All of the above

  • 12. 
    Saving vehicles by definition are designed to minimize risk versus investment vehicles which tend to have greater earnings and risk potential.
    • A. 

      True

    • B. 

      False