Pf2014 Quiz 1: Investing, Saving, Budgeting
A review of savings and budgeting concepts for Eastside Prep Personal Finance course. Good luck!
- 1.A budget surplus occurs when income is greater than expenses.
- A.
True
- B.
False
- 2.Chris works part-time at the Jamba Juice. He gets paid $8/hour and plans to work 10 hours per week throughout the year (assume he works for 50 weeks) as well as a free smoothie for every shift. He pays federal and state taxes equal to 20%. His GROSS PAY for the year is equal to (do not include value of the smoothies):
- A.
$80
- B.
$3,000
- C.
$3,200
- D.
$4,000
- 3.True or False. It always makes sense to select the savings account with the highest interest rate without considering any other factors.
- A.
True
- B.
False
- 4.When it comes to collecting information to make a decision about a specific financial product, watching commercials and listening to your friend's recommendations are all that you need to know.
- A.
True
- B.
False
- 5.What would be the BALANCE of your savings account after three months if the savings account had an annual interest rate of 6% and you started with principal of $500?
- A.
$30
- B.
$15
- C.
$507.50
- D.
$530.00
- 6.To successfully open a savings account, which ONE of the items below are NOT required:
- A.
State issued ID (Driver's license or State ID)
- B.
Evidence of a Job
- C.
Your Social Security number
- D.
If under 18, you must have a guardian sign with you
- E.
A deposit to open the account
- 7.When putting together your personal budget, you find that your budget is in deficit. Indicate the actions that you need to take to balance your budget.
- A.
Increase your income and expenses by the same amount
- B.
Increase your income by an amount greater than your deficit
- C.
Increase your expenses by an amount greater than your deficit
- D.
Increase the spending on your wants
- 8.The Ally Bank Pony commercial is a good example of why it is so important to ask questions when making a decision about a bank's products.
- A.
True
- B.
False
- 9.You are considering opening a savings account and are considering two options. Bank A is in NOT in FDIC program, has interest rate of 5%, minimum deposit of $25 and fees that are competitive to other banks. Bank B is in the FDIC program, has interest rate of 0.01%, minimum deposit of $50 and competitive fees. If you had to choose one of the two banks, which would you choose?
- A.
Bank A
- B.
Bank B
- C.
Bank A and Bank B are the same
- 10.Your friend tells you that she can double her money in a savings account in 24 years. Based on Rule of 72, what do you estimate to be the interest rate on her savings account?
- A.
1.5%
- B.
2%
- C.
3%
- D.
6%
- 11.Which statement about the savings rate in the U.S. is TRUE?
- A.
The savings rate is high enough that most people can retire by the age of 50.
- B.
People in the US generally save too much.
- C.
With the high interest rates on savings accounts today, the savings rate is extremely high.
- D.
The savings rate is typically below 10% in the US and today stands at about 3.5%, which will make it difficult for most people to save enough for retirement.
- 12.Isaiah works for the summer at a technology company and has a salary for the summer of $3,000. After federal and state taxes and Social Security/Medicare taxes are deducted, his take-home pay is $2,500. Which of the statements below is CORRECT?
- A.
His gross pay is $2,500 and net pay is $3,000
- B.
His gross pay is $3,000 and net pay is $2,500
- C.
His gross and net pay are $3,000
- D.
His net pay and gross pay are $2,500
- 13.When banks provide information about savings accounts, they typically quote the interest rates they offer (e.g. 1%) on a...
- A.
Per day basis
- B.
Per month basis
- C.
Per six month basis
- D.
Per year basis
- 14.Banks are required to provide a Truth in Savings Disclosure to all new savings account holders. This disclosure includes information about the fees the bank charges on their savings accounts.
- A.
False
- B.
True
- 15.If you deposit $200 into a savings account with an interest rate of 1% for 3 years, how much simple interest can you brag that you will earn after THREE years?WebRep currentVote noRatingnoWeight
- A.
$1
- B.
$5
- C.
$6
- D.
$25
- 16.A student completing their college education at a four-year college can expect to earn how much more over a typical forty year career than a student with just a high school degree? WebRep currentVote noRatingnoWeight
- A.
$50,000
- B.
$250,000
- C.
$900,000
- D.
$5,000,000
- 17.What is earned interest?WebRep currentVote noRatingnoWeight
- A.
When prices increase as time goes by
- B.
The money you pay as a fee when you use a debit card
- C.
The money that a bank pays you for depositing your money in their bank
- D.
Total amount of money in a bank
- 18.Which of these savings vehicles would work best today if you don't need to access the money for a number of years AND wanted the highest interest rate possible? WebRep currentVote noRatingnoWeight
- A.
Money Market Savings Account
- B.
Certificate of Deposit (CD)
- C.
Simple Savings Account
- D.
None of the options listed
- 19.You are comparing two savings accounts based on their interest you would earn and the fees they charge. Which combination of interest rates and fees are the better deal assuming you have a savings account with an average balance of $500? (Hint: Using a one year period, determine the balance that you would have at year-end at Bank A and Bank B). WebRep currentVote noRatingnoWeight
- A.
Bank A offers you a savings account with a 10% annual interest rate and $5/month in fees
- B.
Bank B offers you a savings account with 2% annual interest rate and no fees
- C.
The two deals listed above are equivalent
- 20.When interest rates are as low as they are now for both savings accounts and loans (recall that Bank of America is offering a 0.01% interest rate on a savings account and interest rates on home loans are extremely low too): WebRep currentVote noRatingnoWeight
- A.
It is bad for savers (who earn interest) and borrowers (who pay interest)
- B.
It is good for savers (who earn interest) and bad for borrowers (who pay interest)
- C.
It is bad for borrowers (who pay interest) and good for savers (who earn interest)
- D.
It is good for borrowers (who pay interest) and bad for savers (who earn interest)
- 21.Based on the rule of 72, a savings account earning 6% per year would allow you to double your money after...WebRep currentVote noRatingnoWeight
- A.
6 years
- B.
8 years
- C.
12 years
- D.
18 years
- 22.When creating a budget, which of the following items would be considered as INCOME (CHECK ALL THE BOXES THAT APPLY)?WebRep currentVote noRatingnoWeight
- A.
Money received as birthday gifts from relatives
- B.
Money spent on school supplies
- C.
Money spent to go to the movies
- D.
Money earned from a part-time job
- E.
Allowance
- 23.Which of the following is a "want" not a need?WebRep currentVote noRatingnoWeight
- A.
Food
- B.
Medicine
- C.
Housing
- D.
A New Sports Car
- E.
Utilities
- 24.What was the MOST important lesson of the Bank Manager role play, when a volunteer came to the front of the class to discuss opening a savings account with Bill?WebRep currentVote noRatingnoWeight
- A.
Savings accounts have low interest rates today
- B.
Bank managers are usually straightforward in describing their savings products
- C.
When pressured to sign an application to open an account (or buy a financial product), it is best to ask for time to review the materials and to walk away.
- D.
It is best not to ask questions but to just let the bank manager describe their savings products.
- 25.Which of the statements below would be considered good advice for creating a budget (SELECT ALL ANSWERS THAT ARE CORRECT)?WebRep currentVote noRatingnoWeight
- A.
Set aside money for Savings FIRST
- B.
Be sure that your WANTS are met first before you set aside money for your NEEDS.
- C.
Keep your expenses less than your income so that your budget will be in surplus.
- D.
Be sure to compare your budget plan with your actual spending so that you can determine if you are staying within your budget.
- E.
Only consider what to save after your wants and needs have been taken care of first.
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