Personal Finance Post-Test

Compound interest is interest paid on interest previously earned. True
It is important to build up your FICO score by taking out credit cards and car loans. False
The purpose of insurance is to transfer risk. True
Opportunity cost is the value of the option you chose to do. True
It is not necessary to record debit card transactions in your check register because accounts are now online. False
One of the most important factors to consider when choosing a career is income potential False
Diversification is one of the many benefits of Mutual Funds. True
According to Dave Ramsey, Baby Step 1 is $10,000 in an emergency fund. False
A Roth IRA is used for retirement savings. True
The Rule of 92 is a way to estimate the time or interest rate you’d need to double your money in an investment. False
A written budget will help you identify how and where you spend your money. True.
You are entitled to a free credit report once a year from each of the three major credit bureaus. False
Don’t fund your 401(k) if your employer does not offer a match.
The higher the risk of the investment, typically the higher the return on that investment. True
A credit card is an example of installment type of credit. True
Discretionary income is the money people use to pay for the necessities of life. False
A fixed rate, fixed term mortgage is a conventional type of mortgage. True
Elasticity of demand indicates that when prices get lower, more people will buy the product. True
Sally has an annual income of $90,000, net worth of $400,000 and expense of $94,000. She is insolvent. False
Term life insurance costs far more than cash-value life insurance. False
How I spend my money is a reflection of my values. True
Money is the root of all evil. False
Buying a home is always better than renting. False
The one thing that God looks at to determine His trust for us is how we spend our money. False
Bankruptcy is a “do over” when it comes to finances, with little (if any) negative consequences. False
Lower monthly payments are better than higher monthly payments when it comes to a loan. False
To be successful in negotiating, one must be willing to walk away from the deal. True
The more liquid the investment, the more risk associated with the investment. False
Credit can be used to own expensive products sooner. True
Tax-exempted income is preferable to tax-deferred/sheltered income. True
Earthquake insurance is covered under the standard homeowner’s insurance policy. False
A budget surplus demonstrates that you are spending more than you make, relying on credit to make up the difference. False
The preferred stage of the economic cycle is the contraction phase. False
Life insurance proceeds are taxable to the beneficiary. False
PMI – mortgage insurance is usually required when the down payment is less than 40%. False
Maturity is learning to delay pleasure. True
If you cut up your credit card, the account is effectively closed. False
Liquidity is the speed and ease with which an asset can be converted to cash. True
The goal of monetary asset management is to minimize interest earned to avoid having to pay taxes. False
Inflation is defined as a steady rise in the general level of prices. True.

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