Budgeting & Money Management
Which best describes opportunity cost in budgeting?
A) Money saved in bank
B) Value of the next best alternative you give up
C) Interest earned
D) Taxes paid
B) Value of the next best alternative you give up
Which factor most directly impacts your credit score?
A) Bank balance
B) Payment history
C) Job title
D) Rent amount
B) Payment history
What does FDIC primarily protect?
A) Loans
B) Investments
C) Deposits in banks
D) Credit scores
C) Deposits in banks
What does owning a stock represent?
A) Loan to company
B) Fixed income guarantee
C) Savings account
D) Partial ownership in a company
D) Partial ownership in a company
What is reported on a W-2 form?
A) Investments
B) Annual wages and taxes withheld
C) Bank savings
D) Insurance claims
B) Annual wages and taxes withheld
Which is NOT a fixed expense? A) Groceries B) Rent C) Mortgage D) Insurance
A) Groceries
What is a finance charge best defined as?
A) Loan principal
B) Credit limit
C) Cost of borrowing money over time
D) Refund amount
C) Cost of borrowing money over time
What does direct deposit eliminate?
A) Taxes
B) Paper checks
C) Bank accounts
D) Interest
B) paper checks
What is a bond most accurately described as?
A) Ownership share
B) Loan to issuer with interest payments
C) Savings account
D) Dividend stock
B) Loan to issuer with interest payments
A tax bracket determines:
A) Tax rate applied to income level
B) Refund size
C) Bank fees
D) Insurance premium
A) Tax rate applied to income level
Which best reflects time value of money?
A) Money loses value instantly
B) Money today can earn interest over time
C) Taxes increase value
D) Expenses stay fixed
B) Money today can earn interest over time
What is revolving credit risk?
A) Fixed payments
B) Increasing debt if balance is not paid
C) Guaranteed savings
D) Tax reduction
B) Increasing debt if balance is not paid
EFT transactions are primarily used for:
A) Cash deposits
B) Loans only
C) Electronic money transfers between accounts
D) Stock trading
C) Electronic money transfers between accounts
Compound interest grows based on:
A) Principal only
B) Taxes
C) Principal plus accumulated interest
D) Fees only
C) Principal plus accumulated interest
A deductible affects:
A) Out-of-pocket cost before insurance pays
B) Monthly premium
C) Credit score
D) Salary
A) Out-of-pocket cost before insurance pays
Pay Yourself First is most closely related to:
A) Spending first
B) Borrowing money
C) Automatic savings before expenses
D) Tax planning
C) Automatic savings before expenses
Unsecured debt differs because it:
A) Has collateral
B) Has lower interest always
C) Has no collateral backing
D) Cannot be borrowed
C) Has no collateral backing
Fund availability is affected by:
A) Credit score
B) Bank processing time for deposits
C) Stock prices
D) Loan interest
B) Bank processing time for deposits
Capital gain occurs when:
A) Asset is sold above purchase price
B) Stock pays dividend
C) Money is deposited
D) Taxes are paid
A) Asset is sold above purchase price
Insurance premium is:
A) Refund amount
B) Deductible
C) Loan fee
D) Regular payment for coverage
D) Regular payment for coverage
Which financial behavior most accurately demonstrates effective use of liquidity management?
A) Investing all income into long-term stocks regardless of needs
B) Maintaining enough cash to cover short-term obligations without selling assets at a loss
C) Maximizing credit card usage to build credit history
D) Converting all savings into illiquid real estate assets
B) Maintaining enough cash to cover short-term obligations without selling assets at a loss
Which action most improves credit utilization ratio?
A) Increasing credit card balances
B) Opening multiple new accounts
C) Paying down revolving balances
D) Closing oldest credit account
C) Paying down revolving balances
Which factor most directly affects an individual's borrowing capacity?
A) Savings account interest rate
B) Number of bank accounts held
C) Creditworthiness and debt-to-income ratio
D) Stock market performance
C) Creditworthiness and debt-to-income ratio
Which is a key tradeoff of mutual funds?
A) Guaranteed returns
B) No diversification
C) Management fees reducing returns
D) No liquidity
C) Management fees reducing returns
In a mortgage, which component of PITI is MOST likely to fluctuate over time?
A) Principal
B) Interest (fixed-rate loan)
C) Taxes and insurance
D) Loan term
C) Taxes and insurance