Question 1

One reason that corporate stock is such a popular investment is that dividends are guaranteed by the FDIC.

Accepted Answer

Dividends are not guaranteed by the FDIC. FDIC (Federal Deposit Insurance Corporation)
only insures deposits in banks and thrift institutions. Stock dividends depend on the company's profitability and decision to pay dividends.

Question 2

In recent years, online banks have often provided higher interest rates than other banks.

Accepted Answer

Many online banks have lower overhead costs and are therefore able to offer higher interest rates to their customers compared to traditional brick-and-mortar banks.

Question 3

A promissory note is what the bank takes as security for a loan, such as a car for a car loan.

Accepted Answer

A promissory note is a written promise to pay a debt, signed by the borrower. It is not taken as security for a loan, but rather serves as evidence of the debt and its terms. Collateral, such as a car, may be taken as security for a loan.

Question 4

Credit allows you to acquire an asset or to obtain a loan and repay the balance at a later time.

Accepted Answer

Credit is a financial tool that allows individuals and businesses to acquire assets or obtain loans with the understanding that they will repay the borrowed balance at a later date with interest. It is a form of debt that provides leverage for investments or purchases that may not be possible otherwise.

Question 5

All experts agree that credit cards are dangerous and should be avoided at all costs.

Accepted Answer

This statement is not entirely true. While credit cards can be dangerous if not used responsibly, they can also provide many benefits such as rewards, convenience, and building credit history. It is important to use credit cards wisely and make payments on time to avoid racking up debt and damaging your credit score.

Question 6

A mortgage is similar to a loan except the money received from the bank is used to purchase a house.

Accepted Answer

This statement is true. A mortgage is a type of loan specifically used to purchase a house or property, where the property itself serves as collateral for the loan.

Question 7

Preparing your budget doesn't do you much good unless you track your actual spending to what you budgeted for various items.

Accepted Answer

Tracking your actual spending against your budget allows you to see where you may be overspending and where you can make adjustments, ensuring that you stay on track with your financial goals.

Question 8

The benefits of having a credit card include not having to carry cash and the opportunity to establish a credit history.

Accepted Answer

Credit cards allow users to make purchases without carrying cash, and consistent use and timely payment can help establish a positive credit history.

Question 9

The Canada Deposit Insurance Corporation (CDIC) is a Crown corporation established to maintain stability and public confidence in the nation's financial system.

Accepted Answer

The statement is correct. The CDIC is a federal Crown corporation that provides deposit insurance against the loss of eligible deposits held with member institutions in the event of their failure. Its mandate is to maintain stability and public confidence in the financial system of Canada.

Question 10

A debit card allows you to make purchases and then defer the payment into the future.

Accepted Answer

A debit card deducts money directly from your checking account at the time of purchase, meaning payment is not deferred into the future. It is different than a credit card which allows you to borrow money and pay it back later with interest.

Question 11

Credit history is the study of financial markets and their impact on interest rates.

Accepted Answer

Credit history is the record of a person's or company's past borrowing and repayment behavior, not the study of financial markets and interest rates.

Question 12

A debit card allows you to make "cash-like" purchases, because your bank balance is reduced immediately each time your card is used.

Accepted Answer

When you use a debit card, the funds are withdrawn from your bank account in real-time, unlike credit cards where a balance is accumulated that is required to be paid off at a later date. Therefore, the purchase made with a debit card can be considered to be as good as cash.

Question 13

A key to financial security is the creation of a "safety net." This "safety net" should be able to cover three to six months of your expenses.

Accepted Answer

A safety net of three to six months of expenses is commonly recommended by financial experts as a way to be prepared for unexpected financial hardships, such as job loss or medical emergencies. Having this cushion can help mitigate financial stress and keep you on track towards your long-term financial goals.

Question 14

When you go to school and work you may have to spend a significant amount of money on gas and car maintenance every month. With some creativity and flexibility you may find that some of these costs are not completely non-discretionary.

Accepted Answer

By being flexible with your schedule and finding alternative transportation methods, such as carpooling or biking, you may be able to reduce the amount you spend on gas and car maintenance. Therefore, not all of these costs are completely non-discretionary.

Question 15

One of the first things you can do in your effort to prepare a budget is to track and analyze a few weeks' worth of your personal financial decisions, including what you take in and what you spend, and how you use your money.

Accepted Answer

Tracking and analyzing your personal financial decisions is a helpful first step in preparing a budget.

Question 16

New credit card legislation passed and signed by the prime minister in 2009 requires credit card companies to give credit card holders a 90-day grace period.

Accepted Answer

The Credit CARD Act of 2009 was signed into law by the President of the United States, not the Prime Minister, and it does not require credit card companies to give a 90-day grace period. It includes provisions like giving consumers a 21-day period to pay their bills after statements are mailed and restrictions on increasing interest rates, among other consumer protections.

Question 17

A grace period is the period of time you have to pay your balance before interest or fees are assessed.

Accepted Answer

A grace period is typically between 21-25 days and during this time, no interest or fees are assessed on your balance as long as you make at least the minimum payment by the due date.

Question 18

The difference between discretionary costs and non-discretionary costs is that discretionary costs are more controllable.

Accepted Answer

Discretionary costs are typically optional or flexible expenses that can be adjusted or eliminated. As such, they are generally more controllable than non-discretionary costs, which are necessary or fixed expenses that cannot be easily reduced or eliminated, such as rent or utilities.

Question 19

Investing involves reducing consumption today in order to build wealth in the future.

Accepted Answer

This statement accurately describes the concept of investing. By setting aside money today and investing it, individuals can potentially grow their wealth over time and have more resources available for future consumption. However, in the short-term, investing typically requires reducing current consumption in order to allocate funds towards investments.

Question 20

A debit card takes three days before it removes the money from your bank account.

Accepted Answer

A debit card removes the money from your bank account immediately or within a few minutes of the transaction, not three days later.

Quiz 20: Personal Finance