Pf2014 Quiz 1: Investing, Saving, Budgeting

A budget surplus means that the income exceeds the expenses, indicating that there is more money coming in than going out. This can be seen as a positive financial situation as it allows for savings or investments.

The statement suggests that watching commercials and listening to friends' recommendations are sufficient for making decisions about financial products. However, this is not true as making informed financial decisions requires thorough research, understanding of the product, comparing different options, and considering individual financial goals and needs. Simply relying on commercials and friends' recommendations may lead to uninformed decisions and potential financial risks.

A new sports car is considered a "want" rather than a "need" because it is not necessary for survival or basic functioning. While food, medicine, housing, and utilities are essential for meeting basic human needs, a new sports car is a luxury item that is not required for basic living.

To successfully open a savings account, evidence of a job is not required. This means that you do not need to provide proof of employment in order to open a savings account. However, you will still need to provide a state issued ID (such as a driver's license or state ID), your Social Security number, if under 18 you must have a guardian sign with you, and a deposit to open the account.

To balance your budget when it is in deficit, you need to increase your income by an amount greater than your deficit. This means finding ways to earn more money, such as getting a second job or finding ways to increase your income through your current job. By increasing your income by a greater amount than your deficit, you will be able to cover your expenses and bring your budget back into balance.

The commercial mentioned in the question, the Ally Bank Pony commercial, serves as a good example of the importance of asking questions when making a decision about a bank's products. This implies that the statement "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" is true.

Bank B should be chosen because it is in the FDIC program, which provides insurance for deposits up to $250,000 per depositor. This means that if the bank were to fail, the depositor's money would be protected. Although Bank B has a lower interest rate compared to Bank A, the peace of mind provided by the FDIC insurance outweighs the slightly higher interest rate offered by Bank A. Additionally, Bank B has competitive fees and a slightly higher minimum deposit requirement, but these factors are not significant enough to outweigh the benefits of FDIC insurance.

The correct answer is to set aside money for savings first, keep your expenses less than your income to have a surplus, and compare your budget plan with your actual spending to stay within your budget. This advice is considered good because it promotes financial stability and responsible money management. By prioritizing savings, individuals can build an emergency fund and work towards their long-term financial goals. Keeping expenses lower than income ensures that there is room for savings and prevents debt accumulation. Regularly comparing the budget plan with actual spending helps identify any discrepancies and allows for adjustments to stay on track.

When making a decision about a financial product, it is important to follow a process that includes comparing products based on the factors that are most important to you. This allows you to evaluate which product aligns best with your needs and preferences. Additionally, doing research on each of the products helps you gather information and gain a better understanding of their features and benefits. It is crucial to figure out the factors that are important to you with the product you are considering, as this ensures that your decision is based on your own priorities. Lastly, reading the fine print of any disclosures is essential to fully comprehend all the fees and terms associated with the account, allowing you to make an informed decision.

Students who had technical skills gained from STEM majors had most of the positions in the "top 10 list" of college majors with the highest starting salaries in 2013. This suggests that majors in science, technology, engineering, and math tend to lead to higher paying jobs right after graduation.

A regular savings account would be the best choice in this scenario because it offers easy access to the money and typically has low minimum balance requirements. While it may not offer a high interest rate, the primary focus is on having easy access to the funds rather than earning a high return. A money market account may also offer easy access to the money but it may have higher minimum balance requirements. A certificate of deposit would have a higher interest rate but would lock the money away for a specific period of time, limiting access. A stock index fund like the S&P500 Fund would involve investing in the stock market and would not provide easy access to the money.

If Eastside Savings were to fail, the FDIC insurance would cover the money you have deposited in your account up to $250,000. This means that you would receive all the money you have deposited at Eastside Savings, ensuring that you do not lose any of your funds. The FDIC stickers in the bank branch and the confirmation on the FDIC website further confirm the protection of your deposits.

Based on the given information, the person's monthly income is $2,500 and their total expenses amount to $2,675. Since the expenses exceed the income, there is a deficit of $175.

Strategy B produces the greatest amount of money after 40 years because it has a higher interest rate of 7% compared to Strategy A's 2%. The effect of compounding is stronger with higher interest rates, resulting in greater growth over time. Although Strategy A invests more money per year, the higher interest rate in Strategy B outweighs the difference in annual investments, leading to a larger final amount.

If the stock has increased by 14.3%, it means that the value of the stock has increased by 14.3% of its original value. Since the original value of the stock was $10, the increase would be 14.3% of $10, which is $1.43. Therefore, when you sell your stock, you will receive the original value of $10 plus the increase of $1.43, resulting in a total of $11.43.

Bank C would be the best choice for opening a regular savings account with a minimum deposit of $200. Bank C offers a higher interest rate earned compared to Bank A and Bank B. Additionally, Bank C does not charge any monthly fees, unlike Bank A and Bank B. Although Bank A has a lower minimum deposit requirement, Bank C provides a better overall value with its higher interest rate and no monthly fees.

As you increase your level of education, excluding Doctoral degrees, you increase your potential earnings and reduce your risk of being unemployed. Additionally, when looking at median weekly earnings, individuals with a bachelor's degree earn about $412 more per week than those with only a high school diploma.

To calculate simple interest, we use the formula: Interest = Principal * Rate * Time. In this case, the principal is $200, the rate is 1%, and the time is 3 years. Plugging these values into the formula, we get: Interest = $200 * 0.01 * 3 = $6. Therefore, after three years, you can brag that you will earn $6 in simple interest.

A Certificate of Deposit (CD) would work best in this situation because it offers a higher interest rate compared to other savings vehicles. Additionally, since the money is not needed for a number of years, the fixed term of a CD aligns well with the time frame. By locking in the funds for a specific period, the bank is able to offer a higher interest rate as they have guaranteed access to the money for that duration. This makes a CD a suitable choice for individuals who are looking for a higher return on their savings and do not need immediate access to the funds.

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When interest rates are low, it is beneficial for borrowers because they can obtain loans at lower interest rates, resulting in lower monthly payments and potentially saving money in the long run. On the other hand, it is not advantageous for savers as they earn less interest on their savings accounts, reducing their potential earnings and making it harder to grow their savings over time. Therefore, low interest rates are good for borrowers but bad for savers.

According to the rule of 72, you can estimate the time it takes for an investment to double by dividing 72 by the annual interest rate. In this case, dividing 72 by 6 gives us 12. Therefore, it would take 12 years for the savings account earning 6% per year to double your money.

Income refers to money that is earned or received. In the context of creating a budget, income is the money that is available to allocate towards expenses. In this question, the items that would be considered as income are: money received as birthday gifts from relatives, money earned from a part-time job, and allowance. These are all sources of money that can be used to fund expenses and should be taken into account when creating a budget.

Based on the Rule of 72, which states that the number of years it takes for an investment to double is approximately equal to 72 divided by the interest rate, we can estimate the interest rate on her savings account. In this case, her friend claims to double her money in 24 years. Therefore, 72 divided by 24 equals 3. This means that the interest rate on her savings account is estimated to be 3%.

The MOST important lesson of the Bank Manager role play is that 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. This suggests that it is important to take the time to fully understand the terms and conditions of any financial product before committing to it, rather than making a hasty decision under pressure.

The correct answer states that the savings rate in the U.S. is typically below 10% and currently stands at about 3.5%. This implies that most people are not saving enough for retirement, as it will be difficult to accumulate sufficient funds with such low savings rates.

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Banks typically quote the interest rates they offer on a per year basis when providing information about savings accounts. This means that the interest rate mentioned is applicable for a period of one year. This allows customers to easily compare and understand the potential earnings on their savings over a longer period of time. By providing the interest rate on a per year basis, banks ensure transparency and enable customers to make informed decisions about their savings.

If you write a check for an amount that is greater than the balance in your checking account, you will be charged fees by the bank for "bouncing a check." This means that the bank will not honor the check and it will be returned to the recipient unpaid. Additionally, you may be charged fees by the business receiving the "bounced check" since it will often lead to your payment being late.

Banks are indeed 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. Therefore, the statement is true.

When selecting a savings account, it is important to consider criteria such as FDIC insurance, interest rate earned, minimum deposit, and fees. FDIC insurance ensures that your deposits are protected up to a certain amount, providing security for your savings. The interest rate earned determines how much your savings will grow over time. The minimum deposit is the minimum amount required to open the account, which may vary depending on the institution. Lastly, fees can impact the overall profitability of the account, so it is important to consider any fees associated with the account.

The question "Is your bank FDIC insured?" is the best question to ask because it is important to ensure that your money will be protected in case the bank fails. The Federal Deposit Insurance Corporation (FDIC) provides insurance coverage for deposits in banks, up to $250,000 per depositor. By asking this question, you can verify the safety of your funds and make an informed decision about opening a savings account with the bank.

Investing in the S&P500 Index Fund will provide a diversified investment and lower your risk. The S&P500 Index Fund is a type of mutual fund or exchange-traded fund (ETF) that tracks the performance of the S&P500 index, which consists of 500 of the largest publicly traded companies in the United States. By investing in this fund, you are essentially investing in a wide range of companies across various sectors, which helps to spread out your risk. This diversification can protect you from the potential negative impact of any single company's poor performance.

The passage discusses the consequences of not having emergency savings and how it can lead to individuals resorting to high-cost borrowing, such as payday lenders or check cashing services. This implies that people without emergency savings often have to pay high interest rates to borrow money. Therefore, the key theme of the passage is that individuals without emergency savings often face financial difficulties and may have to pay high interest rates when they need to borrow money.

A student completing their college education at a four-year college can expect to earn $900,000 more over a typical forty year career than a student with just a high school degree. This suggests that obtaining a college degree significantly increases earning potential and can lead to higher salaries and better job opportunities in the long run.

Bank B is the better deal because it offers a higher interest rate compared to Bank A and does not charge any fees. With an average balance of $500, at the end of the year, Bank A would provide an interest of 10% on $500, which is $50. However, it would also deduct $5 per month in fees, resulting in a total deduction of $60. On the other hand, Bank B would provide an interest of 2% on $500, which is $10, without any fees. Therefore, Bank B would leave the account holder with a higher net balance at the end of the year compared to Bank A.

The correct answer is Apple, Google, McDonalds. This is because the percentage return for Apple is calculated by subtracting the purchase price ($94.19) from the current price ($100.00) and then dividing by the purchase price, resulting in a return of approximately 6.19%. The percentage return for Google is calculated in the same way, with a purchase price of $576.15 and a current price of $595.00, resulting in a return of approximately 3.27%. The percentage return for McDonalds is calculated with a purchase price of $73.15 and a current price of $65.00, resulting in a negative return of approximately -11.12%. Therefore, Apple has the highest return, followed by Google, and then McDonalds.

After 2 years, the balance in the savings account would be more than $600 because compound interest is being applied. Compound interest means that the interest earned in each period is added to the principal amount, and then interest is calculated on the new total. In this case, the interest rate is 10% per year, so after the first year, the balance would be $500 + ($500 * 10%) = $550. Then, in the second year, the interest would be calculated on the new balance of $550, resulting in an amount greater than $600.

The return on the Wal-Mart investment is calculated by taking the difference between the selling price and the purchase price, and dividing it by the purchase price. In this case, the selling price is $75.03 and the purchase price is $77.35. The difference between the two prices is -$2.32. Dividing this by the purchase price gives us -0.030 or -3.0%. This means that the investment has resulted in a 3.0% loss.

By contributing $7,500 per year for 40 years and earning an average of 5% interest annually, the amount of money in the retirement savings will compound over time. Compound interest allows the savings to grow exponentially. At the end of the 40 year period, the savings will have grown to almost $1,000,000.

Based on the given information, your friend plans to save 10% of her $50,000 annual income. This means she will save $5,000 per year. Since she wants to accumulate $30,000 in her emergency savings fund, it will take her 6 years to reach that goal (30,000 / 5,000 = 6). Therefore, the correct answer is 3 years.

Chris works 10 hours per week for 50 weeks, which equals 500 hours in a year. He gets paid $8 per hour, so his total earnings for the year would be $8/hour * 500 hours = $4,000. This is his gross pay before taxes and does not include the value of the free smoothies he receives.

The statement "Many investors get excited about investing in companies that have high earnings growth" is true because investors are often attracted to companies that show potential for high profits and growth. The statement "Over the long term, the stock market has averaged returns of 8-9% per year" is also true as historical data has shown that the stock market has provided average annual returns within this range. Lastly, the statement "When it comes to investing, past performance of an investment is NO guarantee of how the stock will perform in the future" is true because the performance of stocks can vary and is not solely dependent on past performance.

Earned interest refers to the money that a bank pays you for depositing your money in their bank. This is a form of income that is earned on the amount of money you have deposited in a bank account. The bank pays you a certain percentage of interest on your deposit as a way to incentivize you to keep your money with them. The more money you deposit and the longer you keep it in the bank, the more interest you can earn.

After three months, the balance of the savings account can be calculated using the formula for compound interest: A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the time in years. In this case, the principal is $500, the annual interest rate is 6%, n is 12 (compounded monthly), and t is 3/12 (three months). Plugging in these values, we get A = 500(1 + 0.06/12)^(12*(3/12)) = $507.50. Therefore, the balance of the savings account after three months would be $507.50.