Financial Planning and Investment Terminology
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Questions and Answers

What is the formula for calculating net worth?

  • Liabilities - Assets
  • Assets x Liabilities
  • Assets + Liabilities
  • Assets - Liabilities (correct)
  • Which of the following best defines the 'Rule of 72' in finance?

  • An equation to estimate the time to triple an investment at a fixed annual interest rate
  • An equation to estimate the time to quadruple an investment at a fixed annual interest rate
  • An equation to estimate the time to halve an investment at a fixed annual interest rate
  • An equation to estimate the time to double an investment at a fixed annual interest rate (correct)
  • What is the primary purpose of investing?

  • Generating income through employment
  • Purchasing items with the hope of increasing their value over time (correct)
  • Purchasing items for immediate use
  • Saving money in a bank account
  • How is 'gross pay' calculated?

    <p>Total earnings before deductions</p> Signup and view all the answers

    What do voluntary deductions from paychecks typically include?

    <p>401 K, life insurance, charity donations</p> Signup and view all the answers

    What is the percentage taken out of one's check for FICA tax?

    <p>$6</p> Signup and view all the answers

    What is an example of a fixed expense?

    <p>Paying for a monthly bus pass</p> Signup and view all the answers

    What is the overtime rate if a person makes $10.00 per hour and works overtime?

    <p>$15.00</p> Signup and view all the answers

    What does it mean to 'pay yourself first'?

    <p>Budgeting for savings before budgeting for spending</p> Signup and view all the answers

    What should a person keep in a liquid account according to the text?

    <p>3-6 months' expenses</p> Signup and view all the answers

    What is an example of a CD (Certificate of Deposit) con as per the text?

    <p>Penalty for early withdrawal</p> Signup and view all the answers

    What does it mean if a check is 'outstanding'?

    <p>It has not been returned to the bank for payment</p> Signup and view all the answers

    What do lenders/creditors look for when examining 'character'?

    <p>Person’s reputation and willingness to pay off debt</p> Signup and view all the answers

    What are the three credit bureaus responsible for maintaining credit history?

    <p>TransUnion, Equifax, Experian</p> Signup and view all the answers

    What does 'cosigner' mean in the context of borrowing?

    <p>Responsible person who agrees to pay the debt if you fail to pay</p> Signup and view all the answers

    What is the highest possible credit score according to the text?

    <p>850</p> Signup and view all the answers

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