Investing Strategies
What type of fund automatically shifts its asset allocation from majority stocks to majority bonds as you get closer to your retirement year?
A Target-Date Fund (TDF).
What is the main difference between an installment loan (like an auto loan) and a revolving line of credit (like a credit card)?
An installment loan is a fixed amount of money paid back over a set timeframe; a revolving line of credit can be borrowed from, paid off, and borrowed from again repeatedly.
What is the single largest factor that impacts your overall FICO credit score, and what is the highest score you can possibly achieve?
Payment history (paying on time); the highest score is 850.
What is the free federal form that high school seniors must fill out to determine eligibility for grants, work-study, and federal loans?
The FAFSA (Free Application for Federal Student Aid).
What is the relationship between an insurance premium and an insurance deductible?
They have an inverse relationship. If you choose a higher deductible, your monthly premium will be lower (and vice-versa).
Name two major advantages that robo-advisors generally offer compared to traditional financial advisors.
Lower fees and lower account minimums. (They also automate the process using algorithms).
What is the guaranteed way to avoid paying any interest on your credit card balance?
Pay your entire balance in full every single month.
If a data set has a very low standard deviation, what does that tell you about how the data points are positioned relative to the mean?
The data points are clustered very close to the mean
When comparing college pricing, what is the mathematical formula used to calculate a student's Net Price?
Net Price = Sticker Price - Grants - Scholarships
If your car is parked outside during a storm and gets severely dented by hail, what specific type of auto insurance coverage will help pay for the repairs?
Comprehensive coverage.
Double Jeopardy
Antonina wins $12,000 after taxes and decides to invest it in a mutual fund with a historical annual return of 7.5%. Write an exponential equation that models her investment value f(x) over x years.
f(x) = 12000(1.075)^x
What is an asset-backed loan—such as a mortgage or an auto loan—called when the lender has the right to repossess the item if you fail to pay?
Secured debt (or a secured loan).
If you open a brand new credit card but do not change your monthly spending habits at all, what will happen to your overall credit utilization ratio?
Your credit utilization ratio will go down (because your total available credit limit increased).
What is the fundamental difference between a Federal Subsidized student loan and a Federal Unsubsidized student loan?
Subsidized loans do not accrue interest while you are in school (the government pays it), while Unsubsidized loans accumulate interest from the moment they are taken out.
You have an auto insurance policy with a $500 deductible and a $20,000 coverage limit. If you cause an accident resulting in $1,500 of damage to your car, how much do you pay out-of-pocket, and how much does the insurance company pay?
You pay the $500 deductible; the insurance company pays the remaining $1,000
This type of fund is usually passively managed, can be traded throughout the day like a stock, and features very low fees. What is it?
An Exchange-Traded Fund (ETF).
In a fully-amortized loan, what happens to the principal portion and the interest portion of your monthly payment over time?
The principal portion increases, while the interest portion decreases.
In a box plot, what specific percentage of data always falls between the First Quartile (Q1) and the Third Quartile (Q3)? What is this range called?
50% of the data; it is called the Interquartile Range (IQR)
If a student receives financial aid that is labeled as merit-based, what does that mean?
The aid is awarded based on academic success, athletic talents, or other personal accomplishments (not financial need).
In probability math, when do you use a permutation formula versus a combination formula?
You use a permutation when the order of selection matters; you use a combination when the order does not matter.
If an investor buys cryptocurrency simply because they saw a headline about it reaching its highest price ever, what psychological investing bias are they falling victim to?
Chasing Trends.
What mandatory credit card document lays out all of the important interest rates, APRs, and fees in an easy-to-read table?
A Schumer box.
If a graph shows a distribution of prices that has a long tail stretching out toward the higher-value right side, how would you describe its statistical shape, and is the mean higher or lower than the median?
It is skewed to the right; the mean is higher than the median.
In statistical research, what is the key operational difference between an observational study and an experiment?
An experiment actively applies a treatment or influence to its members to look for cause-and-effect; an observational study does not influence the members and cannot demonstrate causation.
If the probability of rain for each of the next three days is 60%, what is the theoretical probability that it will not rain on any of those three days?
6.4% (or 0.06).