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Unit 3 Test Review
| Question | Answer |
|---|---|
| What products and services are offered by banks? | loans, checking accounts, savings accounts |
| Which financial institution is typically nonprofit and member-owned? | credit unions |
| What is a key feature of online lenders as compared to traditional banks and credit unions? | They often have fewer requirements for loan approval |
| The _______________________ is an independent agency of the U.S. government that insures deposits in member banks, protecting depositors from losing money if a bank fails. | Federal Deposit Insurance Corporation (FDIC) |
| The ________________ is a U.S. government agency that protects consumers from unfair, deceptive, or abusive practices by financial institutions. | Consumer Financial Protection Bureau (CFPB) |
| What service do brokerage firms primarily provide? | Investment accounts and financial advising |
| Credit unions tend to have ___________ fees and interest rates on loans over a traditional bank. | lower |
| ________ payment services allow users to link their bank accounts to an app that facilitates the digital transfer of money between two people. | Peer-to-Peer (P2P) |
| TRUE or FALSE: P2P services come with the same protections as other bank payment services such as debit and credit cards. | False |
| How quickly and how much your investment can grow is called _______. | potential returns |
| How easily an asset can be converted into cash for other use is called ____ | liquidity |
| The chance of the investment to lose value is called _______. | risk |
| __________ is the asset that has the highest liquidity. | Cash |
| A ________ is an investment type that represents a loan made by the investor to a company or government. | bond |
| _________ investments such as bonds and CDs are investments that financial advisors suggest you shift more toward as you age. | Fixed-income |
| ______ and _______ is an investment strategy involving buying and holding stocks for a long time. | Buy and hold |
| How should an investor's asset allocation between stocks and bonds change as they age according to the traditional rule of thumb? | Decrease investment stocks and increase investment in bonds |
| The primary advantage of a traditional 401(k) retirement plan is that it ____________ taxable income for the year you contribute. | reduces |
| You will incur a ______ % penalty if you withdraw money from a 401(k) before age _______. | 10%; 59 1/2 |
| An ___________ is a retirement account set up by an individual rather than an employer. | IRA (Individual Retirement Account) |
| A ___________ IRA allows for tax-free growth when money is withdrawn. | ROTH |
| Why is it suggested to start saving for retirement early? | To allow more time for money to grow |
| An _____ is a retirement account set-up by an individual, whereas a _________ is employer-sponsored. | IRA; 401(k) |
| ________ deposits is a common feature of retirement accounts to help ease contributions. | Automatic |
| True or False: Most companies with a 401(k) plan offer some form of employer match or contribution. | True |
| The primary goal of investing is to grow your _________ over time. | wealth |
| One key feature of a Roth 401(k) is that qualified withdrawals are ______-free after age 59½. | tax |
| A potential benefit of investing in individual stocks is ______ growth potential but the _____ of loss is much higher than other investments such as bonds. | high;risk |
| Bonds typically provide investors regular ________ - interest payments. | fixed |
| ______ funds are known for reducing risk through diversification. | Mutual |
| A ________ is an investment that pays fixed interest over time | bond |
| A _________ is a tax-advantaged retirement account. | 401(k) |
| A __________ gives you ownership in a single company. | stock |
| An __________ is a diversified, traded fund on an exchange. | ETF (Exchange Traded Fund) |
| A pension is a financial support from when you retire to the day you die from the person’s _____________. | employer |
| Social security replaces about _________ % of your pre-retirement earnings. | 40% |
| True or False: Even if you save all your life, you could have your life savings slashed by a recession. | True |
| When should someone ideally start planning for retirement according to professional financial advisors? | as early as possible, preferably in your 20s |
| The average monthly benefit from Social Security for full retirement age individuals in 2025 is around $ ____________ . | $2,000 |
| What is the major disadvantage of cash savings for retirement preparation? | Low interest rates |
| Traditional 401(k) and traditional IRA have tax-free _____________. | contributions |
| Roth 401(k) and Roth IRA have tax-free ____________. | withdrawals |
| The maximum amount you can contribute on a yearly basis if you are under the age of 50 to a 401(k) is $ _______________ and to an IRA is $ _______________ . | $23,500; $7,000 |
| A worker has to pay into Social Security for at least ____ years to receive full benefits. | 10 |
| An essential strategy for retirement savings is to pay ____________ first and always be ____________. | yourself; saving |
| _______ loans should be avoided due to their incredibly high cost, sometimes having interest rates as much as 200-300%. | Payday |
| What does a Debt Management Plan (DMP) primarily offer? | Lower interest rates and one monthly payment |
| A potential consequence of declaring bankruptcy is that it will have a severe negative impact on your _________ score. | credit |
| A benefit of fixed interest rates in loans is that it is easier to plan and ____________ . | budget |
| What is one advantage of using a budget for debt repayment? | It helps free up money for extra payments |
| The _________________method is recommended for prioritizing debts with high interest rates. | Debt avalanche method |
| A Chapter ____ bankruptcy allows a bank to liquidate assets to pay creditors’ | 7 |
| A Chapter 7 bankruptcy remains on your credit record for up to ____ years. | 10 |
| What is the first step in the debt negotiation process? | Making a payment plan |
| The two main components of a debt balance are ____________ (the amount of the original loan) and the ________________________ (both the interest and fees you pay over the life of the loan). | principal; finance charge |
| What should you do as soon as you realize you will be unable to pay your bills on time? | Call your creditors to negotiate |
Created by:
teacherdavidfrost
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