Saving/Spending
What is the difference between a traditional IRA and a Roth IRA, and how does each impact your taxes?
A Traditional IRA allows you to deduct contributions from your taxable income now, but you pay taxes on withdrawals in retirement. A Roth IRA is funded with after-tax money, so withdrawals (including earnings) are tax-free in retirement.
What is the term for spreading your investments across different assets to reduce risk?
Diversification
What is the 50/30/20 rule?
The financial rule that suggests spending 50% on needs, 30% on wants, and 20% on savings.
True or False: Credit Cards typically have the highest interest rate payments in comparison to other forms of debt.
True
How many regional Federal Reserve Banks are there in the United States?
12
What is the term for spending money on unnecessary purchases instead of saving or investing?
Discretionary Spending
What happens to the value of bonds when interest rates rise, and why?
Bond prices typically fall. (Newer bonds come to market paying higher interest yields than older bonds already in the hands of investors, making the older bonds worth less).
What is a sinking fund?
A separate savings account set up for a specific future expense, such as a vacation, car repair, or home improvement.
Which type of loan typically has the lowest interest rates?
Mortgages
What is the interest rate at which commercial banks lend to each other overnight?
Federal Funds Rate
What is the main difference between a high-yield savings account and a regular savings account?
A high-yield savings account offers a higher interest rate, helping your money grow faster.
What does beta measure in investing?
A stock's volatility compared to the overall market.
What is a zero-based budget?
Every dollar of income is assigned a specific purpose, with income minus expenses equaling zero.
An acronym that stands for the annual amount a credit card company charges on top of the actual cost of what you bought
APR (Annual Percentage Rate)
Name the three key entities of the Federal Reserve
The Board of Governers, The Reserve Banks, and the FOMC.
If you carry over a credit card balance onto the next billing period, when will interest charges begin on the purchase?
On the day of the purchase.
What does a company's P/E ratio (Price-to-Earnings ratio) measure?
How much investors are willing to pay for each dollar of a company’s earnings.
What is the recommended amount to keep in an emergency fund?
Three to six months' worth of expenses.
What happens if you only make the minimum payment on a credit card?
You will pay high interest and take longer to pay off the debt.
What is "quantitative tightening", and how is it related to the FOMC?
Quantitative tightening refers to the process by which the FOMC reduces its balance sheet by selling government securities or letting them mature, which helps to tighten the money supply after periods of quantitative easing.
Suppose you owe $1,000 on a loan and the interest rate you are charged is 20% per year compounded annually. If you didn't pay anything off, at this interest rate, how many years would it take for the amount you owe to double?
2 to 4 years
If a company has a Price-to-Earnings (P/E) ratio of 10, and the earnings per share (EPS) is $5, what is the stock price?
$50
What is debt consolidation?
Debt consolidation involves combining multiple debts into one loan, often at a lower interest rate, making it easier to manage debt payments.
What is the credit utilization ratio, and how does it affect your credit score?
The percentage of your available credit that you're currently using. A high credit utilization ratio can lower your credit score because it indicates you may be over-relying on credit
What is the term length for the Board of Governors?
14 years. The new term begins every other year.