Question 1

In the context of spending habits, _____ are expenditures for which the spender has significant control in terms of the amount and timing.

Accepted Answer

Discretionary payments are those that the spender can control, such as entertainment or luxury items, unlike obligatory or compulsory payments which are necessary and unavoidable.

Question 2

Jose's mother, who is 83 years old, has been hospitalized for almost four months because of deteriorating health conditions. Thus, each month, a major portion of Jose's income is spent on paying the hospital and medical bills and expenses incurred during diagnostic tests. In this scenario, Jose's medical expenses are an example of:

Accepted Answer

The answer of Jose's mother, who is 83 years old,...

Question 3

One technique for establishing a sizable savings balance is to:

Accepted Answer

Automatically depositing a predetermined amount from each paycheck into a savings account ensures consistent savings and helps build a sizable balance over time.

Question 4

In general, younger investors are more concerned about risk than older investors.

Accepted Answer

Younger investors typically have a longer time horizon to recover from potential losses, making them generally more risk-tolerant compared to older investors who may prioritize preserving their capital as they approach retirement.

Question 5

Taking a pay cut from your temporary job to get experience in your career field most often lowers your chances of landing a good job.

Accepted Answer

Taking a pay cut for relevant experience can increase your chances of landing a good job by enhancing your skills and resume in your desired career field.

Question 6

_____ is a detailed forecast of your expected cash inflows and cash outflows to determine your net inflow or outflow for a given period of time.

Accepted Answer

A budget is a detailed forecast of expected cash inflows and outflows, used to determine net inflow or outflow for a specific period.

Question 7

Which of the following expense tracking tools forces you to assign a spending or savings category for every dollar that goes in and out of your hands?

Accepted Answer

You Need a Budget (YNAB) is designed around the principle of assigning every dollar a job, which means categorizing all income and expenses.

Question 8

Investments that generate low returns tend to be riskier than investments that offer high returns.

Accepted Answer

Investments that generate high returns tend to be riskier, as higher potential returns usually come with higher risk. Low-return investments are generally considered safer.

Question 9

In the context of establishing a sizable savings balance, the concept of "pay yourself first" suggests that you:

Accepted Answer

The "pay yourself first" strategy involves automatically saving a predetermined amount from each paycheck before spending on anything else, ensuring consistent savings growth.

Question 10

In the context of setting up your budget, which of the following is an expense tracking tool?

Accepted Answer

LearnVest is a financial planning company that offers tools for budgeting and expense tracking.

Question 11

Emma runs a salon but does not make much profit from her business. She likes to go on holidays frequently and spends most of her income on vacations. Emma knows that she needs to cut down on her expenses or it would be difficult to bear the daily expenses in the future. In the context of Emma's budget, her expenditures on vacations can be referred to as _____.

Accepted Answer

Discretionary payments are non-essential expenses that can be adjusted or eliminated, such as vacations, which Emma can choose to reduce to manage her budget better.

Question 12

In the context of setting up your budget, which of the following expense tracking tools tracks your spending and suggests budget levels based on that spending?

Accepted Answer

Mint.com tracks your spending and suggests budget levels based on that spending.

Question 13

In the context of setting up your budget, which of the following is a commercial program that you can use to avail a wide range of features, such as online banking services, financial calculators, and stock quotes?

Accepted Answer

AceMoney is a commercial program that offers a wide range of features for budgeting, including online banking services, financial calculators, and stock quotes.

Question 14

Quinton is a wine connoisseur. Every month, he spends a substantial amount of his income to purchase wine from a boutique that sells a variety of imported wines. In this scenario, Quinton's expenditure on wines is an example of a(n):

Accepted Answer

Quinton's expenditure on wines is a discretionary payment because it is a non-essential expense that he chooses to make based on his personal preferences and interests.

Question 15

A(n) _____ is an interest-earning account that is intended to satisfy obligations that your checking account cannot handle.

Accepted Answer

A savings account is an interest-earning account that is typically used to hold funds that are not needed for immediate expenses, unlike a checking account which is used for daily transactions.

Question 16

Kimberly has opened an account in Northwater City Bank. She receives a 3.5 percent interest rate on the money she deposits in her account. She does not use the funds from the account to meet her minor expenditures but only uses them when there is any major expenditure. In the context of this scenario, which of the following kinds of bank accounts does Kimberly hold?

Accepted Answer

A savings account typically offers interest on deposits and is used for saving money rather than daily transactions, aligning with Kimberly's usage.

Question 17

Derrick, a finance graduate, has joined an accounting firm. The firm opens a bank account for him in which his salary gets automatically deposited. He receives a modest but consistent amount of interest on the deposited amount. He does not use the money from the account for his daily expenses but keeps it aside to cover major future expenses. In the context of this scenario, which of the following accounts has the firm opened for Derrick?

Accepted Answer

A savings account is typically used for saving money and earning interest, which aligns with Derrick's situation where he receives interest and saves for future expenses.

Question 18

Karen is the sole breadwinner of her family. Every month, Karen has to pay electricity bills, water bills, and house rent. In this scenario, Karen's fixed monthly expenses are referred to as _____.

Accepted Answer

Nondiscretionary payments refer to expenses that are necessary and cannot be avoided, such as bills and rent, which Karen must pay every month.

Question 19

In the context of retirement plans, the 401(k) plans are offered to employees of certain types of nonprofit organizations such as schools, religious organizations, and charities.

Accepted Answer

401(k) plans are typically offered by for-profit companies, while 403(b) plans are offered to employees of certain nonprofit organizations like schools and charities.

Question 20

Internships usually offer no monetary compensation, but they pay off in other ways.

Accepted Answer

Internships often provide valuable experience, networking opportunities, and skill development, which can be beneficial for future career prospects, even if they do not offer monetary compensation.

Quiz 18: Appendix :personal-Finance-Appendix