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web.groovymark@gmail.com
- December 18, 2024
Question 41
What is a “cashier’s check”?
a) A personal check backed by the funds in a savings account
b) A check written by an individual but guaranteed by the bank
c) A check drawn on the account of the financial institution itself
d) A check that requires a waiting period before funds are available
Answer: c) A check drawn on the account of the financial institution itself
Explanation: A cashier’s check is a check drawn on the bank’s own funds, guaranteeing its payment and often used for large transactions requiring immediate funds.
Question 42
Which of the following is considered a “tangible asset”?
a) A retirement savings account
b) Stocks and bonds
c) Furniture and vehicles
d) Cash in a checking account
Answer: c) Furniture and vehicles
Explanation: Tangible assets are physical items, such as furniture and vehicles, that are used to maintain a person’s everyday lifestyle.
Question 43
What does “insolvent” mean in personal finance?
a) A person has more assets than liabilities
b) A person has more liabilities than assets, leading to negative net worth
c) A person’s income is higher than their expenses
d) A person has no financial obligations
Answer: b) A person has more liabilities than assets, leading to negative net worth
Explanation: Insolvency occurs when a person’s liabilities exceed their assets, resulting in a negative net worth and difficulty meeting financial obligations.
Question 44
What does the “fair market value” of an asset represent?
a) The amount the owner originally paid for the asset
b) The price a willing buyer would pay a willing seller in the open market
c) The depreciated value of the asset over time
d) The book value listed in financial records
Answer: b) The price a willing buyer would pay a willing seller in the open market
Explanation: Fair market value refers to the price that a willing buyer would pay a willing seller for an asset in an open and competitive market.
Question 45
What is a “fixed-rate loan”?
a) A loan where the interest rate changes periodically
b) A loan where the interest rate remains constant for the entire term
c) A loan that can only be used for specific purchases
d) A loan that offers no early repayment options
Answer: b) A loan where the interest rate remains constant for the entire term
Explanation: A fixed-rate loan has an interest rate that remains the same throughout the life of the loan, making it easier for borrowers to predict payments.
Question 46
What is a “variable-rate loan”?
a) A loan where the interest rate fluctuates based on market conditions
b) A loan with a fixed interest rate for the life of the loan
c) A loan that cannot be refinanced
d) A loan with no interest rate attached
Answer: a) A loan where the interest rate fluctuates based on market conditions
Explanation: A variable-rate loan has an interest rate that changes over time, typically based on an underlying benchmark such as the prime rate.
Question 47
What is “bookkeeping” in personal finance?
a) Recording the value of assets and liabilities
b) Documenting income and expenditures
c) Creating a cash flow forecast
d) Calculating tax deductions
Answer: b) Documenting income and expenditures
Explanation: Bookkeeping is the process of recording financial transactions, including income earned and money spent, to track an individual's or family's financial activity.
Question 48
What is a “money market deposit account” (MMDA)?
a) A checking account with no interest
b) A savings account requiring a large initial deposit and paying slightly higher interest rates
c) An account that allows unlimited transactions without fees
d) A tax-free investment account
Answer: b) A savings account requiring a large initial deposit and paying slightly higher interest rates
Explanation: MMDAs are savings accounts that require a larger initial deposit, pay slightly higher interest rates than regular savings accounts, and limit the number of transactions.
Question 49
What is the purpose of the “annual percentage yield” (APY)?
a) To calculate the total return on an investment, considering only the principal amount
b) To determine the interest earned on a deposit over a 365-day period
c) To compare loan interest rates between different banks
d) To estimate tax savings on retirement accounts
Answer: b) To determine the interest earned on a deposit over a 365-day period
Explanation: APY is a standardized way of measuring the total return on an investment or deposit, including interest earned over a full year.
Question 50
What is “amortization”?
a) A method of calculating the depreciation of an asset
b) A schedule of principal and interest payments for a loan
c) A process for refinancing high-interest loans
d) A form of short-term debt repayment
Answer: b) A schedule of principal and interest payments for a loan
Explanation: Amortization is the process of repaying a loan through regular payments that cover both the principal and interest over the life of the loan.
